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CommercialTue, 9 Nov, 21

Green-Rated Buildings Selling at Premium Over Others - Research

Green-Rated Buildings Selling at Premium Over Others - Research

A team of researchers at Knight Frank has conclude that buildings with ESG rated are selling at a price premium of about 18 percent vis-à-vis similar unrated ESG buildings. The research noted that green building ratings are already having a positive impact on building values quantitatively.

The research findings are in line with Knight Frank’s ‘Sustainability Series’ study which found a 3%-13% rental premium, depending on rating for prime Central London office buildings compared to equivalent unrated buildings.

“The importance of ESG in real estate has been widely publicised. But the precise influence of green credentials on a building’s sales price is less well understood. Our research shows that in both hemispheres of the world, green building ratings are already having a positive impact on building values, and we have quantified it.

“We found an 8-18% sales price premium for green-rated buildings compared to equivalent buildings without a BREEAM or NABERS rating across these markets, depending on the level of green rating,” the research posited.

The researchers used hedonic price modelling, a popular methodology used in the residential sector to estimate house prices and in academic eco-certification research, to determine the green premia for office buildings. This method of analysis enables the price of an asset to be represented as the sum of its attributes, including features of the building, as well as where its located and what surrounds it.

“The added benefit of this type of modelling is that while we have been able to use the results to identify the contribution of green ratings to sales price, we have also been able to identify the degree to which locational, lease term and building related factors contribute to a building’s sale price.”

The research team concluded by noting they are confident that the premia identified relate directly to buildings’ green certifications, as influences from other factors are also captured and quantified.

 

Source: Mohammed Bomanso Issah (Real Estate Times Africa)

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