Incorporating Green Building Features and Initiatives (GBFIs) into Commercial Property Valuation:...

Incorporating Green Building Features and Initiatives (GBFIs) into Commercial Property Valuation:

Perceptions of South African Valuers

Saul NurickKaren Le JeuneEmma DawberRyan FlowersJennifer Wilkinson

Department of Construction Economics and Management

University of Cape Town

Source: www.greentechforum.net

Research Question

How familiar is the South African valuation

profession with green building, and are they

taking GBFIs into account when calculating

market value?

Research Proposition

As green building becomes an increasingly

important factor for stakeholders of

commercial properties, it is imperative for

valuers to be able to take into account the

effect on value of GBFIs in their valuation

reports?

Green Buildings

South African Market for Green Building

GBFIs

Applicability of traditional commercial valuation

methods in valuing green building

Green Building Valuation

Green Star rating

Rationale

Green Valuation Issues

Potential Value Impacts

Green Buildings

Research Methods

Findings

Green Building Awareness

Impact of Rating Tools on Value

Experience in Valuing Green

Impact of GBFIs on Market Value

Problems with Valuing Green

Valuation Methods Utilised

Findings

Respondents were asked to rank the problems associated with green valuation

Current vlauation methods are not appropriate for incrporating GBFIs

How green buildings will affect buildings that are not green

Lack of personal knowledge on green

Lack of well defined terminology on green

Some benefits of green building accrue only to the occupier, rather than the developer and owner, and this is difficult to quantify

Lack of standardised, conceptual approach to valuing

Lack of experience in valuing green

Lack of transactional data on green building

0% 20% 40% 60% 80% 100%

18.5%

25.9%

25.9%

29.6%

37.0%

40.7%

40.7%

92.6%

Research Methods

Valuation Simulation

Source: Vunani Property Investment Fund

Valuation Simulation

Valuation Conventional GreenChange

in value

Income Capitalisation

Value

R 30 267 680 R 35 507 120 ↑17.31%

DCF Value R 29 629 074 R 34 762 339 ↑17.33%

Valuation Variables    

Net Property Rental

Values/m2R112.38/m2 R127.38/m2 ↑13.35%

Discount rates 15.50% 13.50% ↓2.00%

Applied Capitalisation

Rates10.35% 10.00% ↓0.35%

Exit Yield 10.80% 10.00% ↓0.80%

Net Rental Escalation 5% 3% ↓2.00%

Vacancy 0% 0% -

Change all the valuation variables

Valuation Simulation

Valuation

Conventional

( Refurbished)

GreenChange

in value

Income Capitalisation

Value R 31 327 049

R 35 507

120 ↑13.34%

DCF Value R 31 289 048 R 34 762

339 ↑11.10%

Valuation Variables    

Net Property Rental

Values/m2R 112.38/m² R 127.38/m² ↑13.35%

Discount rates 13.50% 13.50% 0.00%

Applied Capitalisation

Rates10.00% 10.00% 0.00%

Exit Yield 10.00% 10.00% 0.00%

Net Rental Escalation 3% 3% 0.00%

Vacancy 0% 0% 0.00%

Change in only Net Rental

Conclusions

There is currently a reluctance by valuers to

incorporate GBFIs in their valuations.

Lack of transactional data is a major contributing

factor.

Energy was identified as the most significant GBFI

in green commercial buildings.

Valuers predict that GBFIs will slowly make an

impact in the future.

Research Partners

Thank you