IMPACT OF SUSTAINABLE BUILDING

Impact of Sustainable Building on Property Value



Impact of Sustainable Building on Property Value

Introduction

Climate change has an increasingly high profile globally and is perceived to be directly related to greenhouse gases and CO2-emissions. It has been acknowledged that buildings are substantial greenhouse gas emitters; about 40 % of the overall greenhouse gas emissions in United States are produced by real estate. Assets consume about 30 % of all resources through their construction, operation and demolition and 30 % of overall energy consumption is attributed to real estate. Research from the Inter-Governmental Panel on Climate Change (IPCC) has confirmed that buildings represent the best opportunity to make significant reductions in greenhouse gas emissions while maintaining economic growth; the IPCC estimates that by 2020 CO2-emissions from building energy use can be reduced by 29 % at no extra cost (Meadows, 2006). Over the last twenty years the concept of sustainable development has therefore assumed an increasingly central role worldwide. Since, the abrupt end of the most recent real-estate boom, the discussion of sustainability has come to the fore, with the debate in United States, as elsewhere, having become significantly more dynamic.

Sustainable buildings are generally seen as those which are environmentally friendly, save energy and reduce running costs (Gissen, 2002). Users should benefit from positive working environments. The importance and benefits of sustainable buildings are beyond doubt, at least from social and ecological perspectives. Investment decisions are however made almost exclusively in accordance with financial considerations, as investors are mainly driven by monetary actions. Investment in sustainable commercial buildings has to be justified on an economic basis.

The objective of this study is to investigate what influence sustainability has as a value factor for United States commercial properties and whether a sustainable commercial building in United States is worth more than a conventional one. The two approaches were used to assess whether sustainable buildings have an impact on property Market Value. The paper reviews existing published studies conducted internationally, focusing on the measurement of the direct economic costs and benefits associated with sustainable commercial buildings.

The more the subject of sustainability asserts itself in the real-state industry's collective consciousness, the more urgent becomes the consideration of sustainability criteria in real estate valuation. Valuers are thus facing the new challenge of embracing the practical implications of sustainability. The goal of this paper is, in addition to the objective above, to analyze how, and to what degree, sustainability aspects can be considered in valuation of commercial real estate, determine which valuation techniques are best suited to valuing sustainable buildings, what is required in order to do this and what barriers and challenges do valuers face when assessing the value of sustainability with regard to commercial buildings.

Sustainable Development

Sustainable development considers the so called Triple Bottom Line concept of environmental, economic and social issues. There are two commonly accepted models of sustainability development based on the Triple Bottom Line methodology as first developed by Meadows (2006) and also mentioned by Smith ...