Asset Value Implications of Low Energy Offices
(funded by the Carbon Trust, BP and PEET, and supported by Drivers Jonas, Jones Lang Lasalle, Kingston University, Impetus Consulting, RICS and USS)
As a result of one of the recommendations from previous ACE research on energy efficiency in offices, research into the link between energy efficiency and property valuation was being carried out.
The project addressed a key market failure in the promotion of energy efficiency, namely low take-up of well researched, practical and cost-effective technologies and measures. It is this failure to recognise the value of energy efficiency in investment quality and return on investment that leads to lack of market “pull” for energy efficient office buildings. Legislative “push” is coming through the provisions of the EU Energy Performance of Buildings Directive; this will help raise minimum standards but sustained demand will only come from the recognition that there are genuine business benefits to be gained from investment in energy efficiency.
Whilst this project concentrated on energy efficiency in the office sector, it has direct application to wider property investment. The project will also add value to the adoption of low carbon technology in the market place.
The project started in October 2003 and was completed in March 2005.
60 second findings
- Valuation currently takes no account of energy performance of commercial property
- Demand for good energy performance is not currently an issue. Therefore there is limited supply
- Corporate social responsibility and stakeholder reputation are driving demand in some companies
- The Energy Performance of Buildings Directive will lead to certificates of energy performance.
- This will allow tenants, valuers and investors to identify ‘low energy’ buildings
- Poorly performing properties will be at risk of obsolescence
- Poor energy performers will be a risk in terms of return on investment as tenants demand higher standards at same rental rates
- Investors are likely to examine their portfolio and assess their exposure to a known risk compared to other, less quantifiable, risks especially for longer term investments
- Invisible Property Investment [summary report]
- Asset Value Implications of Low Energy Offices – Phase 2 report
Invisible Property Investment Leaflets for:
- An interactive model of low energy commercial building take-up – try it out below
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