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The relationship between sustainability and the value of office buildings

Myers, Georgia, Reed, Richard and Robinson, Jon 2007, The relationship between sustainability and the value of office buildings, in PRRES 2007 : Proceedings of the 13th Annual Conference of the Pacific Rim Real Estate Society, Pacific Rim Real Estate Society, [Fremantle, W. A.], pp. 1-22.

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Title The relationship between sustainability and the value of office buildings
Author(s) Myers, Georgia
Reed, Richard
Robinson, Jon
Conference name Pacific Rim Real Estate Society. Conference (13th : 2007 : Fremantle, Western Australia)
Conference location Fremantle, Western Australia
Conference dates 21-24 January 2007
Title of proceedings PRRES 2007 : Proceedings of the 13th Annual Conference of the Pacific Rim Real Estate Society
Editor(s) [Unknown]
Publication date 2007
Conference series Pacific Rim Real Estate Society Conference
Start page 1
End page 22
Publisher Pacific Rim Real Estate Society
Place of publication [Fremantle, W. A.]
Summary There is an increasing body of evidence to suggest that the development of sustainability in office buildings and the acceptance of these buildings in the broader property market is increasing. However a gap still remains between the value of sustainability and the value of the building from an International Valuation Standards Committee (IVSC) definition of market value. Current literature is limited in the investigation of the impact of sustainable criteria on value component when undertaking a valuation of a commercial office building. Whilst substantial advances have been made in sustainable design and construction aspects, as well as reducing implementation costs and enhancing benefits associated with sustainability, there appears to be inherent barriers in adopting sustainability in the valuation process for the property industry.

This paper examines the limited previous research into the elements of sustainable criteria that impact upon property value, and in turn should be reflected in traditional valuation methods. The immaturity of the property market for sustainable building is such that current valuation methods do not appear to have significant evidential proof of increased property value through sales or lease evidence for sustainable buildings. Furthermore, this lack of market evidence makes it inherently difficult for valuers to assess the real market value of sustainable buildings through current valuation methodology. In other words, the level of risk associated with incorporating different levels of sustainability into office buildings appears difficult to measure using a market value perspective in today’s property market. Accordingly this paper examines current research that has been undertaken to identify particular sustainable criteria that potentially affects the value of a sustainable building. For example, previous research suggests that sustainable criteria impact upon the valuation equation through rental growth, depreciation, risk premium and cash flow. This paper also examines how other studies have viewed the impact of sustainable criteria and how they are weighted within the valuation equation. The discussion provides an insight into the rapidly evolving area of sustainability and office buildings with emphasis placed on the valuation process that seeks to assess a hypothetical purchaser’s perspective of this relationship.
Notes Reproduced with the kind permission of the copyright owner.
Language eng
Field of Research 150403 Real Estate and Valuation Services
HERDC Research category E1.1 Full written paper - refereed
Copyright notice ©2007, PRRES
Persistent URL http://hdl.handle.net/10536/DRO/DU:30022299

Document type: Conference Paper
Collections: School of Management and Marketing
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