Are green buildings more valuable?
Apparently buildings with better sustainability credentials are achieving markedly higher capital values and rents
Summary: Buildings with better sustainability credentials are achieving markedly higher capital values and rents - that is the conclusion of a study by global real estate consultant JLL. Their analysis of almost 600 central London transactions in a five-year period, seems to demonstrate that the market is increasingly attaching higher prices to more sustainable assets, in anticipation of higher returns and lower risks. The data also apparently shows that this is resulting in improvements being made to the environmental performance of London’s office stock.
Why this is important: When it comes to decarbonisation in the built environment, regulations ('the stick') can only go so far. The 'carrot' of financial value being created from refurbishing to improve efficiency and sustainability will be a powerful motivator.
The big theme: Our buildings, commercial and residential, are estimated to contribute just under 40% of global emissions, if we include both building materials and building operation. Decarbonising our buildings is tough. While new buildings can be made a lot more energy efficient, and be designed to use lower carbon inputs, this still leaves the challenge of refurbishment of existing buildings. Some studies suggest that by 2040, around 2/3 of the building stock will still be buildings that already exist today. And our refurbishment rate of existing buildings is well below where it needs to be.
The details
Summary of a story from JLL
JLL examined 592 ‘pure’ office investment deals that took place in Central London between January 2017 and December 2021. Development, refurbishment and portfolio deals were excluded. Deals were matched for age, size and location, and both BREEAM and EPC status. A ‘hedonic pricing’ model was used to isolate the impact of environmental certification.
