I THINK the green agenda in the property sector reflects the climate change agenda in general - there's an awful lot of talk about it but there's not much action that I can see.
Many believe greenhouse gases will cause the world to heat up so much that sea levels could rise enough to swamp low-lying areas in as short a time as 50 years.
Many of us are using the car less, turning off our central heating and accept that nuclear power stations and wind farms may need to be built at the bottom of our gardens.
In a similar way, there have been a lot of words written on Energy Performance Certificates, Green Leases, the Code for Sustainable Homes, the Zero Carbon Homes initiative and the Carbon Reduction Commitment.
But I don’t see much change in the marketplace yet.
While the Climate Change Act 2008, the Carbon Reduction Commitment regulations and the EU’s Energy Performance of Buildings Directive provide an impetus for building owners, landlords, occupiers and investors to look more seriously at energy efficiency and sustainability issues throughout the lifecycle of a building, I think the most persuasive arguments will be those based on the economics of going green.
To embrace the sustainability agenda, investors and developers active within commercial property markets need to justify any additional costs that might be incurred by investing in so–called ‘green’ buildings.
The key question is will such investment result in superior financial returns in the shape of either, or both, increased rents or lower yields?
The Royal Institution of Chartered Surveyors (RICS) has just launched two research reports which could add grist to the mill.
RICS commenced its Climate Change Series in 2009 to bring together the latest climate change-related work across research, policy and practice.
The new reports, published last week, look at two important areas.
The first of those was entitled Is sustainability reflected in commercial property prices: A review of existing evidence. It critically analyses the current published evidence base for a price premium for 'green' commercial buildings.
The second is an investigation of the effect of eco-labelling on office occupancy rates which looks at whether commercial office buildings in the USA with an eco-label have occupancy rates superior to those of non-labelled buildings.
Both are produced by teams from British universities but based very much on evidence from the US and Australia. There are studies taking place in the UK but they are at a very early stage.
Early indications are that occupiers say they are happy to pay higher costs for green buildings but there is no evidence that this is happening. I think it’s vital that data relating to building certification and energy use is brought together with other property-based information and made more easily available, especially within the UK.
The valuation profession, in particular, needs common definitions, a meaningful index, industry-wide benchmarks and common measurement and reporting if we are going to have effective negotiations between landlords and tenants.
RICS is already making progress in this area with the Information Paper on Sustainability and Commercial Property Valuation published last September.
All this information is accessible at www.rics.org (it’s best to type the report titles into the search box) but clearly further research is needed.
If you are interested in being part of that, please drop me an email.
:: Kevan Carrick is partner at JK Property Consulting LLP and policy spokesman for RICS North East. His email address is firstname.lastname@example.org