Post on 18-Oct-2020
Sven BienertCompetence Center of Sustainable Real Estate, University of Regensburg, Germany
Daniela PopescuTechnical University „Gheorghe Asachi“ Iasi, Romania
Supported by
www.immovalue.org Focus on Property Value Increasesas a Benefit of Weatherisation
IEE project: Improving the market impact of energy certification by introducing energy efficiency and life-cycle costs into property valuation practice (IMMOVALUE)
EVALUATING THE CO-BENEFITS OF LOW-INCOME WEATHERISATION PROGRAMMESIEA Fuel Poverty Workshop 1. Dublin ,27-28 January 2011
IMMOVALUE-Methodologies for integration of energy efficiency into property valuation practise
Green Value vs. Market Value
A Green Building is a property that uses resources efficiently, reduce waste and CO2 emission, provide superior indoor air and other qualities, and avoid negative social impacts.
Energy efficiency is therefore part of the various green building features.
A Green Value is the net added value obtainable by a green property in the market compared to a non-green peer group.
According to the definitions of green and market value it can be assumed that the green value is an integral part of the overall market value.
8-9 % Decrease of operating expenses
7,5 % Increase of the current market value
6,6 % Increase of the ROI
3,5 % Increase of the occupancy rate
3 % Increase of rent
Source: U.S. Green Building Council, Date: 15.04.2008
In US-Numbers (here LEED)...
IMMOVALUE-Methodologies for integration of energy efficiency into property valuation practise
What does a green building promise?
IMMOVALUE-Methodologies for integration of energy efficiency into property valuation practise
Integration of green attributes – three major obstacles (Or why markets failed)
Cognition
CO2 reductionSaving limited resources Indirect social benefitsPsychological benefits(improved health)
Wellbeing of employeeCorporate responsibilityOccupational health and safetyProductivity of core business
Society in general
Tenant - intangible
Occupational Costs (rent & operative
expenses) Other Lease Terms
Positive/negative external effects of a
property but no sufficient market
value impact
“Limit of System”
Problem Solution Effect
Restrictions/penalties/public grants for negative/positive
external effects by Government
Tenant - tangible
Recognized claimed improvements but
limited market impact
“Limit of Focus”
Transparent communication of
(intangible) benefits and productivity gains
Does it pay off?
and in more detail
Does “Green” pay off?
Financial figures e.g.:
NOI, ROI, Yield, etc.
“Limit of Practice, Evidence
and Methods”
IMMOVALUE-Methodologies for integration of energy efficiency into property valuation practise
Some basic answers!
Are new valuation methods needed? NO2
Could there be a general premium / discount rule ? NO
1
Could there be a pan-European approach/guidance to these aspects? YES
3
Should we distinguish between developed and less transparent markets? YES
4
Do we also need to revise report structures accordingly? YES
5
Are there already valuers who handle this aspect in the right way? NO6
IMMOVALUE-Methodologies for integration of energy efficiency into property valuation practise
Published empirical research results on green value
- - - - - -1.50%
3.00% 6.10% - - 3.00%
- - 2.80% - -
- - 0.30% - -
- - - 11.80% -
- - - - 6.00% -
8.00-9.00% 13.60% - - - -
- - - - - 0.25-0.50%
6.60% 9.90% - - - -
3.50% 6.40% - - - -
7.50% 10.90% - - - -
- - - - 16.00%
- - 5.76% 10.00% -
- - 9.94% 31.00% -
- - - 11.40% -
Energy Star
Energy Star/LEED
LEED
USA(Mc Graw, Hill
Construction 2005)
USA(Eichholtz et al. 2009,
using CoStar Database)
Rental Growth for non-Green
Market value
Reduction cap rate
Rent Premium for Green
Decrease Operating Expenses
Increase occupancy ratio
Improved ROI
Energy Star/LEED
USA(Mc Graw, Hill
Construction 2008)
Australia(Bowman, Wills
2008)
USA(Miller et al. 2008,
using CoStar Database)
USA(Fürst, McAllister.
2008,using CoStar Database)
Selling price
CountryVariable
Effective Rent
Energy Star
LEED
Question at the beginning: can a single valuer ever perform this for every valution? - NO
2
The „hard“ way: using advanced methods!1
Finding the proof for the connection between lower energy cost and higher rents
3Offices with 532 observationsin 57 towns during 2002 - 2005
IMMOVALUE-Methodologies for integration of energy efficiency into property valuation practise
Few empirical results in Europe
Obtaining complete data sets4
Different databases5
Market analysis always lags behind the market68767 flats in Vienna,Data set from 2004 - 2007
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IMMOVALUE-Methodologies for integration of energy efficiency into property valuation practise
German data set analysis – results
IMMOVALUE-Methodologies for integration of energy efficiency into property valuation practise
8767 rental flats Vienna 2004-2007
So up front investment cost for energy saving can be compared to rental premiums2
Result: 100 % increase in energy cost will shift rental income up to 95 BP1
There is no “One fits all market rule”!3
National valuation organizations should run regression for general guidance.
4
There must be some guidance for emerging markets.
5
Methodologies for integration of energy efficiency into property valuation practise
Summary of hedonic approach
Due to the various types of EPCs across Europe direct integration of the label information is not
possible.6
Direct Cap italisation (45%)
yes (48%)
Market rent (30%)
One-/Two-Family-Houses (24%)
1 % to 3 %
premium (21%)
no (58%)
Discounted-Cash-Flow (33%)
not yet, but considering (37%)
remaining economiclifetime (13%)
Office (26%)
3 % to 5 %
discount (10%)
yes (42%)
Cost Appr. (12%)
no (13%)
lump-sum (14%)
Multi-Tenant -Residential Property (26%)
both(7%)
sales comp. approach
maintenance cost (20%)
Condominiums (13%)
5% to 10 %
n.a.
Yield (7%)
10% to 20 %
OPEX (7%)
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Already observed quantitative differences between energy‐efficient and conventional properties
How value difference for energy‐efficient properties has been implicated
Difference in market value on average
Related to which type of property the value difference occured
Valuation parameter used to expresse quantitative value differenece
Has been energy efficiency already be considered within the qualitative descriptive part of valuation
Already observed quantitative differences between energy‐efficient and conventional properties
How value difference for energy‐efficient properties has been implicated
Difference in market value on average
Related to which type of property the value difference occured
Valuation parameter used to expresse quantitative value differenece
Has been energy efficiency already be considered within the qualitative descriptive part of valuation
Already observed quantitative differences between energy‐efficient and conventional properties
How value difference for energy‐efficient properties has been implicated
Difference in market value on average
Related to which type of property the value difference occured
Valuation parameter used to expresse quantitative value differenece
Has been energy efficiency already be considered within the qualitative descriptive part of valuation
Already observed quantitative differences between energy‐efficient and conventional properties
How value difference for energy‐efficient properties has been implicated
Difference in market value on average
Related to which type of property the value difference occured
Valuation parameter used to expresse quantitative value differenece
Whichwell‐known valuation approaches are most appropriate for integration of energy efficiency
n.a.
n.a.
n.a.
IMMOVALUE-Methodologies for integration of energy efficiency into property valuation practise
Survey
IMMOVALUE-Methodologies for integration of energy efficiency into property valuation practise
CONCLUSIONS
A certain willingness to pay for environmental features exist.Very energy efficient and sustainable properties come up with a premium of 5-10 %.
There is a gap between theoretical importance and the practical application in integrating energy efficiency and other sustainability issues into property valuation .
Valuers need reliable data bases on comparable buildings including not only data on building site, rent level and building equipment but also on energy efficiency and different operational cost categories.
Results and methods of IMMOVALUE research are reflected in the actual Guidance Note for the integration of energy performance and LCC into EVS which has been prepared by the European Group of Valuers’ Association (TEGoVA) .
Contact datawebsite http://immovalue.org/SV Dr. Dipl. Sven Bienert MRICS Tel. +43 512 599 96-5321 Director Fax. +43 512 599 96-5021
e-mail sbienert@kpmg.atAddress Kudlichstraße 41-43
4020 LinzAdamgasse 236020 Innsbruck
Prof. Daniela Popescu Tel. +40746036497e-mail daniela_popescu@tuiasi.roAddress Technical University Iasi
Bd. D. Mangeron n.59 A,Iasi, Romania, cod 700050
THANK YOU FOR YOUR ATTENTION!