Value impact of sustainabilityLinking sustainability and property valueGreen DeskElsbeth QuispelRonald Bausch30 August 2011
Content• Introduction• Sustainability impact for corporate occupiers• Sustainability impact for investors• Case: “Driving ...
SustainabilitySustainability still hot topic, providing opportunities   Improves letting ability of current stock and prov...
Sustainability impact for corporate occupiers                                                4                            ...
Creating value through sustainabilityCorporate and investor added value              Brand value                          ...
Corporate (occupier) sustainabilityAdded value for end-users (qualitative)  Productivity:  Research has shown that offerin...
Corporate (occupier) sustainabilityAdded value for end-users (quantitative)  Efficient use of space:  By applying efficien...
Sustainability impact for investors                                      8                                      8
Value impact of sustainability10 sustainability value factorsPositive value factors (8)  Rent value / income      Increase...
Value impact of sustainabilityAdded value for investors  Higher rental income  Research has shown that companies are willi...
Value impact of sustainabilityAdded value for investors  Future law and legislation  A ‘green’ building more easily satisf...
Driving Sustainability Goals        sustainableof “Eco Company”30 August 2011Elsbeth QuispelRonald Bausch
Sustainability case• International property owner, with ambitious sustainability goals.• Property is out-dated, with an En...
‘Best fit certification methodology• Based on the location of the building in The Netherlands an EPA-U or BREEAM certifica...
Scenario analyses                                           Scenario Analysis        Scenario III: BREEAM (Very) Good   • ...
Scenario I: EPA – U label CImprove from G label to C label• Total investment appr. € 350.000,- excl. VAT• Investment expen...
Scenario II: EPA – U label AImprove from G label to A label• Total investment appr. € 850.000,- excl. VAT• Investment expe...
Scenario III: BREEAM (Very) GoodImprove from G label to BREEAM (Very) Good (incl. EPA-U label A)• Total investment appr. €...
Value impact per scenarioStatus building                  G label (current)        C label       A label      BREEAM GoodR...
Contact:                        Ronald Bausch                                       Sustainability Consultant             ...
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sustainability performance - value impact

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Presentatie van Jones Lang Lasalle tijdens overleg Platform Duurzame Huisvesting op 30 augustus 2011.

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sustainability performance - value impact

  1. 1. Value impact of sustainabilityLinking sustainability and property valueGreen DeskElsbeth QuispelRonald Bausch30 August 2011
  2. 2. Content• Introduction• Sustainability impact for corporate occupiers• Sustainability impact for investors• Case: “Driving Sustainability Goals of Eco Company” 2
  3. 3. SustainabilitySustainability still hot topic, providing opportunities Improves letting ability of current stock and provides opportunities for systemic vacancy Sustainability awareness of investors and occupiers: Increasing energy costs Reducing carbon footprint Corporate Social Responsibility Almost 90% of Corporate Real Estate executives consider sustainability aspects as a factor of influence in their location decisions100%80% 89%60% 50% 36% 40%40% 24% 25% 14%20% 11% 0% Not a factor / not sure A factor taken into account “Tie-breaker” factor Major factor 2008 2009 3 3
  4. 4. Sustainability impact for corporate occupiers 4 4
  5. 5. Creating value through sustainabilityCorporate and investor added value Brand value Industry leadership Reputation Innovation Investor relations Regulation compliance Productivity Recruitment & Retention Corporate Sustainability Strategy Strategy Benchmarking Reporting Investor Sustainability Implementation Acquisition/ Renovation/ Green Leases Development Retrofitting Compliance Planning approvals Reduced operational costs Rental growth Reduced insurance costs Meeting occupier demand Valuation benefits Future proofing investments 5
  6. 6. Corporate (occupier) sustainabilityAdded value for end-users (qualitative) Productivity: Research has shown that offering comfort and a healthy working environment results in a positive effect on the well-being of employees. This may enhance health and satisfaction and thus increase productivity. Image: A green corporate headquarters and the use of green space in general, may signal to stakeholders (investors, financers, clients) and employees that the organisation has a long-run commitment to CSR policy. If this translates into an improved reputation, such a policy may attract and retain employees and clients. Company risks and opportunities: Sustainable real estate reduces the risk of reputation damage, but also provides opportunities. Financers are more critical about the CSR policy of companies, when providing debt. Furthermore, governments are increasing their criteria with regards to their purchases. And last, consumers are increasingly demanding sustainable products. 6 6
  7. 7. Corporate (occupier) sustainabilityAdded value for end-users (quantitative) Efficient use of space: By applying efficient and flexible workplace, savings on the total housing costs can be realised. By efficient use of space, the energy consumption is also often reduced. Energy reduction: By using energy efficient and smart systems, or systems that generate or recover energy, energy savings can be realised to an amount of more than 50% compared to a conventional building Productivity: There is a positive correlation between a building’s internal environment and employee health and productivity. This may help to reduce labour costs. Legislation: There are plans on panelising unsustainable use of property. These plans are based on energy consumption taxes and CO2 emissions. If these are introduced, this leads to a direct negative financial impact. 7 7
  8. 8. Sustainability impact for investors 8 8
  9. 9. Value impact of sustainability10 sustainability value factorsPositive value factors (8) Rent value / income Increased rent related to improved working climate and reputation Service costs savings deducted in rent Decreased vacancy risk Other factors Government and other organizations prefer ‘green’ leases Smaller installations (less space /capacity required) Write-off period increases Future law and legislation Tax and subsidiesNegative value factors (2) Building costs (triple layered glass is more expensive than double) In general, maintenance expenses are higher for a more expensive building 9 9
  10. 10. Value impact of sustainabilityAdded value for investors Higher rental income Research has shown that companies are willing to pay higher rents for a ‘green’ building due in part to the superior working environment (indoor air quality) and the positive impact of leasing a ‘green’ building on a company’s image. Lower risk of long-term vacancy There is a lower risk of – long-term – vacancy due to the growing demand for sustainable office space and the current shortage of such properties. Lower energy consumption Sustainable buildings are better insulated and consume less energy, resulting in lower energy costs. By off-setting part of this savings via a premium on the basic rent (e.g. using a ‘green lease’ construction) the actual market rent increases, which positively impacts the value of the property. Lower maintenance and system replacement costs As the buildings are better insulated, sustainable accommodation requires the use of fewer major (heating and/or air conditioning) systems, or systems with a smaller capacity. As a result, the maintenance costs and the costs associated with replacing these systems are lower. 10 10
  11. 11. Value impact of sustainabilityAdded value for investors Future law and legislation A ‘green’ building more easily satisfies the more rigorous environmental requirements of the future. CO2 emission requirements will become stricter in the future. By investing in sustainability now, fewer additional investments will be required in the future. Longer life cycle The use of sustainable materials means the building will be able to be used for longer. As a result, sustainable office buildings will have a higher residual value in the future. Financing opportunities Institutional investors like pension funds are increasingly seeking funds with a sustainable profile to allocate their investments. 11 11
  12. 12. Driving Sustainability Goals sustainableof “Eco Company”30 August 2011Elsbeth QuispelRonald Bausch
  13. 13. Sustainability case• International property owner, with ambitious sustainability goals.• Property is out-dated, with an Energy Label G.• Jones Lang LaSalle is executing a sustainable retrofit, this includes: - Sustainable scenario analysis - Impact on value calculations - Project management - Agency services 13
  14. 14. ‘Best fit certification methodology• Based on the location of the building in The Netherlands an EPA-U or BREEAM certificate is advisable• For international acknowledgement BREEAM or LEED are preferred options• Research on an other sustainability certificate is possible The scenario’s contain both an EPA-U (C or A level) and BREEAM certificate 14
  15. 15. Scenario analyses Scenario Analysis Scenario III: BREEAM (Very) Good • Technical analysis Scenario II: A label - Implementation possibilities in occupied building Scenario I: C label - Implementation of solar cells produced on Eco Company equipment • Energy savings Current situation • Financials: - Investments required - Tax benefits and subsidies - Impact on property value • Certification options • Implementation time frame 15
  16. 16. Scenario I: EPA – U label CImprove from G label to C label• Total investment appr. € 350.000,- excl. VAT• Investment expenses per m² gfa (9.130m²) € 38,50 per m²• Calculated energy savings approximately € 19.000,- per year and 7,0% CO2 reduction• Required adjustments: - Upgrade current climate installation (e.g. heat recovery in airhandling, heat pump, HE-boiler) - Replace conventional lighting by HF lighting (incl. occupancy detection, daylight compensation)• Expenses from the current renovation plan include € 115.000,- to replace the current cooling unit and central heating boiler in the coming 2 years. If scenario I is implemented these expenses are included.• Therefore the total (additional) investement to improve from G to C label is appr. € 235.000,- 16
  17. 17. Scenario II: EPA – U label AImprove from G label to A label• Total investment appr. € 850.000,- excl. VAT• Investment expenses per m² gfa (9.130m²) € 93,10 per m²• Calculated energy savings approximately € 39.000,- per year and a 13,7% CO2 reduction• Required adjustments: - Upgrade current climate installation (e.g. heat recovery in airhandling, heat pump, HE-boiler) - Thermal energy storage with a well (a permit is required) - Replace conventional lighting by HF lighting (incl. occupancy detection, daylight compensation) - Replace glass external windows• Expenses from the current renovation plan include € 115.000,- to replace the current cooling unit and central heating boiler in the coming 2 years. If scenario I is implemented these expenses are included• Therefore the total (additional) investement to improve from G to C label is appr. € 735.000,- 17
  18. 18. Scenario III: BREEAM (Very) GoodImprove from G label to BREEAM (Very) Good (incl. EPA-U label A)• Total investment appr. € 1.700.000,- excl. VAT• Investment expenses per m² gfa (9.130m²) € 186,- per m²• Calculated energy savings approximately € 39.000,- per year and a 13,7% CO2 reduction• Required adjustments: - Energetic adjustments according scenario II - Several sustainable adjustments like re-use of rainwater, water- and energy (sub)metering, energy & waste management• Positive area / transport effects: - Public Transport - Bicycle shed - Cycle and pedestrian safety• BREEAM Very Good is not likely due to presence of tenants during renovation• Additional expenses compared to scenario II appr. € 90,- per m² 18
  19. 19. Value impact per scenarioStatus building G label (current) C label A label BREEAM GoodRequired investment € 115.000 € 350.000 € 850.000 € 1.700.000Write-off installations n/a 20 25 25Letting potential 9 months 9 months 8 months 7.5 monthsRent value € 320 per m² € 323 per m² € 325 per m² € 328 per m²Rent growth 2.10% 2.10% 2.20% 2.30%Yield 6.65% 6.60% 6.50% 6.45%Average Nett Value € 23.500.000 € 23.700.000 € 24.000.000 € 23.600.000• Starting point: total leased building for 5 years from now• Not inlcuded: - Subsidies - Energy recovery 19
  20. 20. Contact: Ronald Bausch Sustainability Consultant Strategic Advisory NL Tel. + 31 (0) 20 5 405 405 Email: ruben.langbroek@eu.jll.com Elsbeth Quispel Head of Sustainability Services Strategic Advisory NL Tel. + 31 (0) 20 5 405 405 Email: elsbeth.quispel@eu.jll.comCOPYRIGHT © JONES LANG LASALLE IP, INC. 2010

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