Are sustainable buildings worth more?

The increasing adoption of sustainable practices has provided commercial returns with reduced operating costs, such as energy consumption.

To date, due to the lack of direct evidence, CBRE has not incorporated sustainability factors into its appraisal methodology and does not expect, in the short term, that a building’s sustainability rating will lead to an automatic change in values. It must be evidence-based, says Hunting.

According to Roger Hunting, director of Broll Valuation & Advisory Services, sustainable practises allow for greater marketability of the property concerned, particularly with regard to the public sector or in markets where there is over-supply.

Broll is part of CB Richard Ellis Affiliate Network.

Hunting explains that these are findings from CBRE, which has launched its Sustainability Checklist.

The checklist is aimed at establishing an evidentiary base whereby property valuers will be able to directly correlate the impact of sustainable building attributes and innovations to the value of an asset. 

"Sustainability and its promotion is an important, natural evolution of the real estate industry.”

He says their role through this checklist is to credibly address the challenge of weighing up the direct effect of sustainability initiatives on asset values – an issue for both investors and valuers.

The deployment of this across such a significant sample will provide a benchmark from which to assess future data, he says.

To date, due to the lack of direct evidence, CBRE has not incorporated sustainability factors into its appraisal methodology and does not expect, in the short term, that a building’s sustainability rating will lead to an automatic change in values.

It must be evidence-based, says Hunting.

John Symes-Thompson, senior director, Valuation and Advisory Services, UK, says the information gathered will enable the industry to map more precisely the relationship between an asset’s sustainable features and its value.

This will also differentiate between gimmicks and game-changing investments.

“As this relationship becomes more quantifiable, the benefit for investors will be that they can prioritise the projects that offer the greatest impact for both the environment and their bottom line,” says Symes-Thompson.

The Sustainability Checklist will cover a statistically significant universe of approximately 15 000 commercial properties with a combined value in the region of R12.6 billion.

Those in the know say that landlords who invest in green buildings are set to attract key tenants.

What’s more, the buildings being let will have far higher occupancy levels than ordinary buildings, says Org Geldenhuys, managing director of Abacus Divisions.

Geldenhuys explains that one of the property developers at Route 21 Corporate Park in Irene, Pretoria – a R2 billion office park development is currently investing R60 million in a 4 000 square metre green building.

The owner, while charging a similar rent to other property owners in the office park, is building a fully fledged green building, which has the potential to save its tenant a total of up to R40 000 in monthly operating costs.

“While the building is in the process of being completed the owner is taking a 20 year view of his investment and expects to attract high calibre tenants, with a very high occupancy rate compared to traditional buildings.”

As an example, he says green-efficient air conditioners can save up to 50 percent on running costs of normal air conditioners which account for as much as 60 percent of the overall electricity bill. On a 4 000 square metre building, electricity costs could run between R80 000 to R100 000 per month.

As an example, he says green-efficient air conditioners can save up to 50 percent on running costs of normal air conditioners which account for as much as 60 percent of the overall electricity bill.

On a 4 000 square metre building, electricity costs could run between R80 000 to R100 000 per month. 

“This means that, by having the benefits of energy-efficient ‘green’ air conditioners, tenants cold save up to R30 000 on the monthly electricity bill.”

While Geldenhuys admits the jury is still out, he does believe that green buildings will definitely attract high quality tenants and long-term tenants – something that will ultimately play out in favour of the landlord. – Denise Mhlanga

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