Green districts add environmental and economic value

21 July 2015

Developing green districts has the potential to add considerable economic, environmental and social benefits to the people and businesses that exist there, research by McKinsey & Company shows. In green districts, energy consumption is down by 20-40%; freshwater consumption and wastewater production by 60-65%; and solid waste by 25%; while the quality of life is rated more highly. While the initial design and construction investment adds millions to the development, the long term benefits of sustainable green technologies pay for themselves in around 5-10 years through lower operating costs.

Green districts are areas which are densely populated and geographically cohesive, where technologies and design elements are deployed to reduce resource use and pollution. As more and more people globally are moving into urban and city life and environmental concerns are gaining awareness, the development of these areas might be paramount for a sustainable future.

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In a recent article, titled ‘Building the cities of the future with green districts’, McKinsey & Company considers the benefits of green districts. To do so, the consulting firm quantifies the benefits of deploying sustainable technologies in de development of future cities around the world.

For the analysis of the districts, the consultancy considered fifteen well established green district technologies, covering buildings, waste, water, transport, and utilities, as well as ten design elements, such as permeable pavements, green space, bike lanes, and building orientation. The analysis was then considered within the context of three geographic areas that have different needs: Northern North America, the Yangtze Delta in China, and the Persian Gulf region. The area considered is one-square-kilometre, and a 70-30% mix of residential and commercial space respectively. The model considers the wide deployment of the available technology within the local context.

Green technologies

Economic viability
The researchers find that green districts are economically viable, although their long term value added is dependent on the local environmental context. The analysis shows that green districts have considerable potential toward lowering the cost of living in the areas within a number of years. According to McKinsey, while the initial investment in the one-square-kilometre park is between $35 million to $70 million, or between $1,000 and $4,000 per resident, the reduction in operating cost saves $250 to $1,200 per resident annually, and would see the districts pay for themselves within a relatively short timeframe.

Environmental benefit
Besides the economic benefits of introducing the technologies considered into future builds, the environmental effects are by no means ineffective. The energy consumption of green districts is reduced between 20-40%; freshwater consumption and wastewater production drops 60-65%; solid waste drops 25%; while the number of private vehicles per kilometre travelled drops 50-80%.

People benefit
The deployment of green districts may have wider ramifications for the people that live there, with the study highlighting that better transit design and energy planning, green districts can set a course toward cleaner, less congested, more liveable cities.

Institutional developers and operators

Implementation barriers
Although the benefits of green districts are a win for the residence in terms of economics, environmental and social terms, the creation of such spaces remains problematic. One of the key issues is that the upfront investment costs of many of the technologies are relatively high, while the long term benefits to those that come to purchase the more expensive residences are not explicitly clear. “The simplest way to overcome this difficulty is for the developer and the operator to be the same—for example, in new districts built by universities, government complexes, and medical centres. These may therefore be the most logical places to start the movement, because they are well positioned to test the value of green-district technologies and design features,” the research states.

New business models will need to be developed that make the benefits of investment clear. In addition, institutional developers that themselves operate their development, might be best suited to early adopting a move toward sustainable construction design and implementation. The article concludes: “Green development will not make a bad deal a good deal; like any other project, it requires the right location, marketing, and design. But green development can make a good deal a great one by maximizing a district’s economic, social, and environmental potential. On that basis, green districts have a future—and possibly a big one.”