Académique Documents
Professionnel Documents
Culture Documents
Sustainability
June 2016
More specifically
More specifically
It is important
To note that
It is ALSO important
To note that
Table of content
1. Introduction
2.
3.
4.
5.
INTRODUCTION
Learning objectives
This section covers the following content/issues:
INTRODUCTION
Learning objectives
This section will enable you to:
INTRODUCTION
Why valuation
professionals are
crucial in
market transformation
INTRODUCTION
Why valuation
professionals are
crucial in
market transformation
INTRODUCTION
Valuing sustainability
is not rocket science!
INTRODUCTION
INTRODUCTION
Qualitative judgement is
needed in all valuation
assignments for most building
features. Sustainability
features are no exception to
this.
However, to provide a
transparent valuation service,
valuation professionals are
required to explain their expert
opinion on both the benefits of
sustainable design and risks of
conventional design.
INTRODUCTION
Your existing
sustainability
related guidance
INTRODUCTION
Table of content
1. Introduction
Learning objectives
This section covers the following
content/issues:
Learning objectives
This section will enable you to:
Your (market)
environment
is changing
Climate change:
flooding, extreme weather,
droughts
Environmental risks:
air, water and soil pollution
Resource scarcity:
energy carriers, land, water,
materials
Consumers and end-users
increasing environmental
consciousness and changing
value-systems
Why improving
the energy
performance
of our buildings is
important
~ 19 % of energy-related GHGemissions!
International, EU
and national
policy measures
for buildings
International level
International, EU
and national
policy measures
for buildings
National level
Introduction of Energy
Performance Certificates (EPCs)
Financial benefits and incentives
(subsidy programmes)
One-letter
improvement in the
EPC rating can
make all the
difference!
Source: Bio Intelligence Service, Ronan Lyons
and IEEP, 2013, Energy performance certificates
in buildings and their impact on transaction
prices and rents in selected EU countries, Final
report prepared for European Commission (DG
Energy), p. 15.
In Switzerland, sustainable/energy
efficient building practices are
becoming the norm in new
construction.
Going forward it is expected that
current price premiums for
sustainable buildings will turn into
brown discounts on price for the
conventional building stock!
Source: Salvi, et. al, 2010, Der Minergie-Boom unter der Lupe,
Center for Corporate Responsibility and Sustainability,
Universitt Zrich
Sustainability as a
credit risk
assessment
criteria
Option 1
the carrot
Option 2
the stick
Table of content
1. Introduction
2. Rationale & Business Case
3. Energy performance
4. Key information sources
5. Integration into valuation methodologies
and valuation reports
6. Conclusions
ENERGY PERFORMANCE
Learning objectives
This section will cover the following
content/issues:
ENERGY PERFORMANCE
Learning objectives
This section will enable you to:
Energy consumption/demand
and associated emissions are
the most tangible
(measurable) sustainability
features
Most robust empirical
evidence base available
Due to the introduction of
EPCs, energy data is most
readily available
Client awareness is higher
than with other sustainability
features
Energy consumption directly
links through to operational
costs
2%
5%
heating
6%
domestic hot water
15%
cooking
lighting
72%
household
appliances
12%
heating
20%
cooling and
vatilation
14%
lighting
22%
office equipment
other
32%
ENERGY PERFORMANCE
External?
Internal?
Any visible damage?
Any signs of humidity?
ENERGY PERFORMANCE
Heating systems?
Heating/cooling source?
Lighting system?
Building control system?
Available?
Date?
Recommendations?
ENERGY PERFORMANCE
The energy
performance
of a building
can be described
through
ENERGY PERFORMANCE
The energy
performance
of a building
can be described
through
ENERGY PERFORMANCE
Table of content
1. Introduction
2. Rationale & Business Case
3. Energy performance
Learning objectives
This section will cover the following
content/issues:
Learning objectives
This section will enable you to:
Extended information
requirements for
valuation professionals
KEY
KEYINFORMATION
INFORMATIONRESOURCES
SOURCES
In addition to energy
data, to value
sustainability you have
to collect information
regarding
Energy Consumption
(Drinking) water Consumption
Risks to local environment
Building flexibility and adaptability
Building accessibility
User comfort and indoor air
quality
Site
Consideration
Building
Documentation
Site
Consideration
Building
Documentation
KEY
KEYINFORMATION
INFORMATIONRESOURCES
SOURCES
Your key
information sources
for energy consumption
Energy performance
certificates (EPCs)
Green/sustainable building
certificate/label/rating
(BREEAM/LEED, etc.)
Planning Documentation
Due Diligence Reports
Field inspection/personal
investigation
KEY
KEYINFORMATION
INFORMATIONRESOURCES
SOURCES
Your key
information sources
for energy consumption
Field inspection/personal
investigation
Table of content
1. Introduction
2. Rationale & Business Case
3. Energy performance
4. Key information sources
Learning objectives
This section covers the following content/issues:
Learning objectives
This section will enable you to:
Valuations based
on Market Value
Valuations based
on Investment
Value (worth)
Energy performance
of a building can
directly link through to various
value-relevant factors!
Energy performance of a building can directly link through to various value-relevant factors!
Marketability/
Lettability
Marketing speed
Letting time
Reductions/discounts due to
modernisation/refurbishment
backlog
Useful economic
life span of a
building
Level of operating
costs
Achievable rent
level
Image
(of building and
owner)
CO2 taxes
Degree of obsolescence/
deprecation rates
Wider sustainable
building features
linking through to value
estimates
Energy efficiency
Reduced impacts on
the environment
Increased
functionality,
serviceability,
durability and
adaptability
Ease of conducting
maintenance,
servicing and
recycling activities
Increased comfort
and
well-being of
occupants
Resulting effects
Assumed impact of
sustainability credentials
on key valuation input
variables
CONVENTIONAL BUILDING
SUSTAINABLE BUILDING
CONVENTIONAL BUILDING
SUSTAINABLE BUILDING
- Growth component
+ Marketability
+ Other property
risks
+ Environmental /
health impacts
+ Depreciation
+ Marketability
Costs of finding
new tenants
Maintenance
Costs of finding
new tenants
Market Rent
+ Depreciation
Operating costs
attributable to
tenants
Operating costs
attributable to
tenants
Risk Premium
Risk Premium
+ Environmental /
health impacts
- Growth component
Maintenance
Management
Management
+ Other property
risks
Net Income
Net Income
Risk-free rate
Risk-free rate
Figure modified from: ITO, M. , 2009, Embodiment of added value for Green Real Estate,
Paper presented at Tokyo Workshop 2009 on urban Cap and Trade Towards a Low Carbon Metropolis
Key challenge
Translation of energy
as a single sustainability feature
Replacement Cost
Approach
Achievable Rent
Income Approach
Heating Costs
Energy source
Building Characteristics
Energy consumption
CO2-Emissions
Energy
Performance
Risk
Market
Value
Image / Marketability
Market adjustments
Source: NUWEL, 2011, Nachhaltigkiet und Wertemittlung von Immobilien Leitfaden fr Deutschland, sterreich und de Schweiz , Published by: CCRS, Center for Corporate Responsibility and Sustainability , Universitt Zrich
Valuation
methods
Adjustment Screws
Comparable sales method
Explanation:
Practical
recommendations
for comparable
sales analyses
Practical
recommendations
for comparable
sales analyses
Practical
recommendations
for comparable
sales analyses
Practical
recommendations
for comparable
sales analyses
Adjustment Screws
Investment method
Improved competitiveness
Rising energy costs
Sustainability Hype
Explanation:
GI: Gross rental income per year
OCT: Operating Costs non attributable to tenants
ri Risk free rate
rp Risk premium
g Growth rate
d Depreciation
(ri + rp - g + d) All Risks Yield (ARY)
Practical
recommendations
for the investment
method approach
performance characteristics
(consumption values, level of
operating costs, comfort levels, etc.).
Practical
recommendations
for the investment
method approach
Availability of green/sustainable
building certificates/labels/ratings
Annual statements/accounts of utility
costs
Consumption values
Practical
recommendations
for the investment
method approach
Practical
recommendations
for the investment
method approach
Practical
recommendations
for the investment
method approach
Practical
recommendations
for the investment
method approach
modernisation/refurbishment
backlog due to poor energy
Adjustment Screws
Replacement cost approach
Explanation:
RC: Replacement Costs
:
=
Practical
recommendations
for the replacement
cost approach
Practical
recommendations
for the replacement
cost approach
Adjustment Screws
Discounted Cash Flow (DCF)
Explanation:
n: time frame in years
GIe: Gross rental income
OETz: Operating expenses non attributable to tenants
ME: Marketing expenses
Improved competitiveness
OE: Other expenses (e.g. modernisation, etc.)
Rising energy costs
OI: Other income (e.g. advertising on building facade, etc.)
Sustainability Hype
: Discount rate
Longer useful economic lifespans : Gross rental income in year n
Longer compliance with stringent : Operating expenses non attributable to tenants in year n
environmental legislation
: Risk free rate
: Risk premium
g: Growth rate
d: Depreciation
More stable cash flows
Improved marketability
Lower sales risks
Image/reputation gains
Potential for increases in rents
( )
:
( + +)
time frame
Practical
recommendations
for the Discounted
Cash Flow (DCF)
Practical
recommendations
for the Discounted
Cash Flow (DCF)
Provide:
Source: Royal Institutions of Chartered Surveyors (RICS), 2014, RICS Valuation Professional Standards January 2014 Valuation Practice Statement 4, p. 59-60
Extended
building descriptions
as part of improved
valuation reports
How to structure the information about the physical characteristics and attributes of
the building in valuation reports
Technical equipment
Energy source
Building description B
(construction & products)
Construction type
Carrying structure and foundation
Load bearing reserve
Type of external walls/envelope
Type of windows and glazing
Type of internal walls
External surface materials
Internal surface materials
Other materials and products
How to structure the information about the physical characteristics and attributes of
the building in valuation reports
Technical quality
Society
Technical
Quality
Structurlal safety
Fire protection
Noise protection
Moisture protection
Maintanability
Flexibility and adaptability
Ease of cleaning
Durability
Resilience against natural and
man-made hazards
Design for deconstruction and
recyclability
Functional
Quality
Environmental
Quality
Economic
Quality
Functional quality
Environment
Economy
Environmental quality
Economic quality
Aesthetic quality
Urban design quality
Cultural value
Health & well-being
Indoor air quality
Comfort (thermal, visual,
acoustic, olfactory)
User safety
User participation and control
Accessibility (to and inside the
building)
Energy performance
Resource depletion
GHG-emissions & GWP
Other impact on the global &
local environment incl. Risks to
the local environment
Land use change & sealing
Water consumption
Wastewater
Waste (construction & user
related)
Practical recommendations
for valuation reports
Practical
recommendations
for valuation reports
Practical
recommendations
for valuation reports
Practical
recommendations
for valuation reports
Risk-documentation:
Graphical illustration of
sustainability-related risks
and opportunities of the
property.
Sensitivity-analysis/
Monte-Carlo simulation:
Table oF contents
1.
2.
3.
4.
5.
Introduction
Rationale & Business Case
Energy performance
Key information sources
Integration into valuation methodologies
and valuation reports
6. Conclusions
CONCLUSION
No straightforward or automated
formula to account for sustainability
issues in valuation exists.
Final words
CONCLUSION
About RENOVALUE
The Project
About RENOVALUE
The Project
Partners
Funded By
RenoValue is funded by the Intelligent Energy
Europe Programme of the European Union and is
managed by the Executive Agency for Small and
Medium sized Enterprises (EASME)
Website
www.renovalue.eu
Contacts
Twitter
@renovalueEU