How can you increase property values with green features?
Are you a commercial building owner wondering how to increase your property value? Thanks to the Institute for Market Transformation (IMT) and the Appraisal Institute, there is a new resource to help you understand how to maximize your property value with green building and energy efficiency: Green Building and Property Value: A Primer for Building Owners and Developers.
While it doesn’t have all the answers, this resource is a guide for arming yourself and your appraiser with information to help support a higher market value. If you’re refinancing, beware of property tax implications, but if you’re selling, be prepared to demand more money for your energy-efficient property—especially if you have a third-party label such as ENERGY STAR®or the U.S. Green Building Council’s LEED (Leadership in Energy & Environmental Design), the world’s most widely recognized and widely used green building program.
Rental premiums of LEED commercial buildings can be as high as 27 percent and about 14 percent for ENERGY STAR buildings, according to studies cited in the primer. One researcher found that sales premiums for both LEED and ENERGY STAR were about 25 percent. The Primer includes sections on:
- Leading indicators (local market, comparables, incomes and expenses, tenant demands, costs)
- Four components of value and how green fits in (revenue, occupancy, operating expenses, risk)
- Navigating the appraisal process (internal valuation, refinance, sale)
- Talking to lenders
- Getting an appraisal that values green
- Owner checklist for appraisals
- Green asset value: Positive considerations and downside risk
You’ll be in good company if you’re thinking about LEED certification. DNV GL’s Sustainable Buildings and Communities (SBC) has advised Wells Fargo, Google, Rambus, the U.S. Army, Skype, Salesforce, and other companies on achieving LEED certifications. SBC certified its 117th LEED Project last month, with most of the projects attaining Gold or Platinum status.
If third-party certification sounds too ambitious, make as many energy-efficient property improvements as you can. Saving energy reduces operating expenses and increases net operating income (NOI). Saving energy will make your building more competitive, and according to IMT, energy-efficient properties have higher occupancy levels, lease-up rates, and sale prices than less efficient properties. For more information, please contact Erik.Dyrr@dnvgl.com.