Commercial Energy Efficiency, Green Building & Property Value
Energy costs are the single largest expense for commercial buildings. IMT seeks to develop and deliver new methods and approaches for appraisers and lenders to use in considering the influence of energy performance on commercial and residential property values. IMT works with appraisers, real estate agents and other real estate professionals to increase the recognition of energy costsand energy performance in commercial property valuation. IMT's work in this area includes research, continuing education for professionals and promoting enhanced methods of documenting and benchmarking energy performance.
NEW GUIDE TO APPRAISING ENERGY-EFFICIENT BUILDINGS - RELEASED MAY 2012
IMT partnered with the Appraisal Institute to produce this updated guide, which will help appraisers assess the impact of energy performance on property value.
Topics covered include: why energy matters for cash flow and net income; how energy performance is assessed; and how energy performance is “benchmarked,” or compared to that of other buildings; and qualifications and certifications of professionals who assess building energy performance. There are also case studies of two buildings that saw quantifiable gains in sale price or appraised value due to energy efficiency.
The guide was unveiled at the 2012 ACEEE Energy Efficiency Finance Forum in Boston.
RATING & DISCLOSURE: Rewarding Efficiency in the MarketYou can't manage what you haven't measured. Yet most U.S. building owners, including governments, have not measured the energy efficiency of their buildings, limiting their ability to manage and reduce energy consumption. Rating the energy efficiency of buildings empowers owners with information to set efficiency goals, track building efficiency over time, identify and replicate best practices in building operations, and prioritize investments in energy audits, retrocommissioning and retrofits. These measures can directly and indirectly lead to significantly lower utility bills and higher profit margins. But that's just half the story. According to research from leading academic institutions, properties with superior energy efficiency ratings have higher occupancy levels, lease rates and sale prices than less efficient properties. Tenants and real estate investors are demanding efficient properties and, in many cases, paying a premium to lease or own where energy costs are lower. Banks and insurance companies are beginning to reward efficient property with better financing and lower premiums. Simply put, efficient buildings are more competitive buildings. This trend will likely accelerate as more buildings are rated and more ratings are disclosed, while also exerting pressure on less efficient buildings to improve their energy performance. |
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ENERGY EFFICIENCY & PROPERTY VALUE:
Look at the Data
Do more efficient and sustainable commercial buildings yield higher...
...Rental rates? |
...Sale prices? |
...Occupancy rates? |
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For Real Estate Professionals
- The basics on energy efficiency and property valuation
- Guidelines for appraisers
- IMT publications on energy efficiency appraisal.
- IMT seminars for real estate professionals.
IMT Projects
- Property Valuation in California and New York
- Energy Efficiency Upgrades and Retrocommissioning in California Long-Term Care Facilities
- Pacific Gas & Electric's CoolTools™ Project.
Leading Research
- Green Noise or Green Value? | Fuerst & McAllister 2011.
- Green Design and the Market for Commercial Office Space | Wiley, Benefield & Johnson 2010.
- How Rishy are Sustainable Real Estate Projects? | Jackson 2009.
- Value Beyond Cost Savings: How to Underwrite Sustainable Properties Scott Muldavin, Green Building Finance Consortium (2010).
- Energy Efficiency and Real Estate: Opportunities for Investors | Ceres and Mercer 2010.
- "Investment Returns from Responsible Property Investments: | Pivo & Fisher 2009.
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Doing Well by Doing Good? Green Office Buildings | Eicholtz, Kok, Quigley 2010
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Clean Energy and Climate Policy for U.S. Growth and Job Creation: | UC Berkeley (2009)
- Do Green Buildings Make Dollars and Cents? | CB Richard Ellis and University of San Diego Burnham-Moores Center for Real Estate (2009).
- New Evidence on the Green Building Rent and Price Premium | Fuerst & McAllister 2009.
- High Performance Green Building: What's it Worth? | Cascadia Region Green Building Council, Vancouver Valuation Accord and Cushman & Wakefield (May 2009).
- Does Green Pay Off? | CoStar (July 2008)
PACE FINANCING
New mechanisms for commercial financing of energy efficiency include PACE (Property-Assessed Clean Energy) initiatives. This financing tool allows property owners to secure funding for efficiency or renewable projects through a tax lein (which in most cases is senior to other lein obligations); the loan is repaid as a special line item on local property taxes over a 5- to 20-year term. In this way, the green investments are internalized into the property and valued accordingly.
Previously pioneered in Berkeley, CA in 2008, PACE loans were initially targeted at the residential sector. However, recent developments in the real estate market and proclaimations by the housing finance community have reoriented this mechanism toward the commercial sector. There are numerous commercial PACE programs in development or implementation around the country (including Sonoma County and Fresno, CA as well as Los Angeles, San Francisco, and the District of Columbia). IMT is tracking the progress and effectiveness of PACE programs as the political and financial climates continue to evolve.
- Read more about PACE financing from CoStar Group and the Institute for Building Efficiency
