Incorporating Green Building Features and Initiatives (GBFIs) into Commercial Property Valuation: Perceptions of South African Valuers

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Incorporating Green Building Features and
Initiatives (GBFIs) into Commercial Property
Valuation Perceptions of South African Valuers

• Saul Nurick
• Karen Le Jeune
• Emma Dawber
• Ryan Flowers
• Jennifer Wilkinson

Source www.greentechforum.net
Department of Construction Economics and
Management University of Cape Town
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Research Question

• How familiar is the South African valuation
  profession with green building, and are they
  taking GBFIs into account when calculating market
  value?

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Research Proposition

• As green building becomes an increasingly
  important factor for stakeholders of commercial
  properties, it is imperative for valuers to be
  able to take into account the effect on value of
  GBFIs in their valuation reports?

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Green Buildings

• South African Market for Green Building
• GBFIs
• Applicability of traditional commercial valuation
  methods in valuing green building
• Green Building Valuation
• Green Star rating
• Rationale
• Green Valuation Issues
• Potential Value Impacts

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Green Buildings
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Research Methods
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Findings

• Green Building Awareness
• Impact of Rating Tools on Value
• Experience in Valuing Green
• Impact of GBFIs on Market Value
• Problems with Valuing Green
• Valuation Methods Utilised

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Findings
Respondents were asked to rank the problems
associated with green valuation
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Research Methods
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Valuation Simulation
Source Vunani Property Investment Fund
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Valuation Simulation
Change all the valuation variables
Valuation Conventional Green Change in value
Income Capitalisation Value R 30 267 680 R 35 507 120 ?17.31
DCF Value R 29 629 074 R 34 762 339 ?17.33
Valuation Variables    
Net Property Rental Values/m2 R112.38/m2 R127.38/m2 ?13.35
Discount rates 15.50 13.50 ?2.00
Applied Capitalisation Rates 10.35 10.00 ?0.35
Exit Yield 10.80 10.00 ?0.80
Net Rental Escalation 5 3 ?2.00
Vacancy 0 0 -
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Valuation Simulation
Change in only Net Rental
Valuation Conventional ( Refurbished) Green Change in value
Income Capitalisation Value R 31 327 049 R 35 507 120 ?13.34
DCF Value R 31 289 048 R 34 762 339 ?11.10
Valuation Variables    
Net Property Rental Values/m2 R 112.38/m² R 127.38/m² ?13.35
Discount rates 13.50 13.50 0.00
Applied Capitalisation Rates 10.00 10.00 0.00
Exit Yield 10.00 10.00 0.00
Net Rental Escalation 3 3 0.00
Vacancy 0 0 0.00
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Conclusions

• There is currently a reluctance by valuers to
  incorporate GBFIs in their valuations.
• Lack of transactional data is a major
  contributing factor.
• Energy was identified as the most significant
  GBFI in green commercial buildings.
• Valuers predict that GBFIs will slowly make an
  impact in the future.

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Research Partners
Thank you