Greening buildings can increase property value

By going green, commercial buildings can save 10% in operating expenses and reap a 2% increase in capital value.

This is one of the key findings of a joint study, by the Building and Construction Authority and the Department of Real Estate in National University of Singapore in collaboration with the top six real estate consultancy firms – CB Richard Ellis, Chesterton Suntec, Colliers International, DTZ Tie Leung, Jones Lang LaSalle and Knight Frank, on how green buildings can impact their property value.

“There is now greater awareness in the industry that the upfront cost of retrofitting energy inefficient buildings can be recovered in about 4 to 7 years,” said Mr Quek See Tiat, Chairman, BCA, at the Breakfast Talk for CEOs on the last day of the 2011 International Green Building Conference today. “However, many do not realise that another potential economic benefit is the potential enhancement in the property value for green and energy efficient buildings.”

Initiated by BCA and the Department of Real Estate, National University of Singapore in February 2011, the study aimed to evaluate whether Green Mark-rated commercial buildings have an impact on commercial property valuation. A sample of 23 commercial properties from office, retail, hotel and a mix of these uses were used in the study. Key factors considered included the tenure and age of the property, its location (district code), the Gross Floor Area and Net Lettable Area, the BCA Green Mark award rating and year awarded, energy consumption figures (before and after retrofit) and the capital expenditure for the retrofit project.

In addition to the key finding that property value can indeed increase by greening and retrofitting existing buildings to be more energy efficient.The study also found that:

• Retrofitting to achieve the standard BCA Green Mark certification can result in a significant reduction in energy consumption. The average savings from the buildings sampled after retrofitting is about 17% of the total building’s energy consumption compared to before retrofitting. If measured by the area of the buildings where the owners are responsible for paying for the utilities, the average savings is even higher at nearly 30%.

• The effort to achieve Green Mark certification need not be costly. If the retrofit cost is expressed as a percentage of the current market value of property, it is 0.5% for retail and 1% for offices. There is also no significant disruption to both owners and users in their continuous occupation and operations.

As a next step, the Department of Real Estate in NUS is developing a valuation guideline for green commercial properties that will take into account the cost and benefit of newly developed and retrofitted green commercial properties. This will be done in collaboration with representatives from the six real estate consultancy firms and BCA. Additionally, BCA is working with the Singapore Institute of Surveyors and Valuers to incorporate guidelines on green building valuation.

At the Breakfast Talk, eight leading developers and building owners also signed the Green Pledge to show their commitment to attain higher energy efficiency of their existing buildings through the BCA Green Mark certification by 2020. They are Allgreen Properties Ltd, Ascendas Land (Singapore) Pte Ltd, CapitaLand Limited, City Developments Ltd, Frasers Centrepoint Limited, Furama Hotels International, Keppel Land Limited and Lend Lease.