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Tuesday, September 22, 2009

Valuing Green--CBRE Makes The Financial Case For Building Green [LEED] [Energy Efficiency]

CB Richard Ellis, the worldwide behemoth of real estate services, issued a report which addresses "the economics of sustainable buildings." Their conclusion? Basic level of certification adds between 2-3% to the cost, higher levels of accredidation add 5-7% of construction costs. This is fairly in line with other cost estimates which have been issued. However, there were some other interesting conclusions from the report:

  • Although developers will reap some rewards in terms of higher rents and enjoy higher rates of rental growth,the rates of rent additionality is about the same as the excess development costs (2-6%), so the additional rental value is essentially a wash.
  • Improvements in energy savings can be between 10-50%, a major number.
  • Residential customers will pay some premium for green, but not necessarily the actual cost of the green improvements
  • Extra value will need to accrue from the investment markets for the lower risks and higher valuations of green buildings.

How should this study effect decisions making at the policy and business level?

  • The potential market benefits from greening buildings have not solidified--this means that incentives can still be powerful tools to motivate green projects. The incentive may be the tipping point.
  • Energy savings, and measurement of the realization of energy savings, is an important factor in "pencilling out" green improvements. From a policy perspective, this puts even more value on reporting and disclosure of building performance measures.
  • Policy measures need to be different for commercial and residential sectors to motivate green. There may need to be different levels of incentives applied to motivate different segments.

Valuing Green--CBRE Makes The Financial Case For Building Green : Green Building Law Blog

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