Green Building and Property Value
How Green Building and Energy Efficiency Drives Up Commercial Property Values
In the simplest terms, energy-efficient buildings are more competitive buildings. Energy costs are often one of the largest expenses for owners of commercial buildings. When buildings are more efficient, that means energy costs are lower—which translates into higher returns.
What’s more, a growing body of research shows that energy-efficient properties have higher occupancy levels, lease-up rates, and sale prices than less-efficient properties. Increasingly, tenants and real estate investors demand green buildings and energy efficiency, paying a premium to lease or own comfortable, healthy space where energy costs are lower. Banks and insurance companies are beginning to reward energy efficiency with better financing and lower premiums.
This trend will accelerate. As more buildings are energy rated and those ratings are made public, building owners will be motivated to ramp up their properties’ efficiency—to save money on utility bills and to stay competitive with the market.
IMT is working to identify ways that appraisal and lending can better capture the value of energy efficiency. Our experts help develop and promote innovative methods that appraisers, lenders, commercial real estate agents, and other professionals can use to factor energy performance into property valuation. IMT has worked with leading organizations including the Appraisal Institute and Appraisal Foundation to provide guidance to leading appraisers and property owners on how best to capture the value of green attributes. IMT is also writing case studies of commercial buildings that examine the building energy performance effects on property value. We actively seek additional case studies, suggestions, and partners.
Current IMT resources on valuation include:
- High-Performance Buildings and Property Value: A Primer for Lenders
- Valuing Energy Efficiency: A series of six case studies
- A Guide to Green Building and Property Value for Owners and Developers
- A Guide to Green Building and Property Value for Appraisers
- An Overview of Rental, Sale, and Occupancy Premiums for Green Buildings
- Additional case studies: Telergy Office Building, Morrison Manor Apartments, Pine Harbor Apartments
Additional resources from our partners include:
- The Appraisal Institute's Green Building Resources
- The Appraisal Institute's Commercial Green and Energy Efficient Addendum
- Information Atlat for Appriasing Green and High-Performance Buildings
- An Introduction to Retrofit Value for Owner Occupants
- Department of Energy Literature Review
- RICS Sustainability Research
- The Appraisal Foundation Video: Introduction to Green Building Valuation
Graphics on financial benefits of high-performance buildings
Higher rental rates, sale prices, and occupancy rates: As our graphics demonstrate, studies consistently show that ENERGY STAR and LEED-certified commercial buildings perform better.