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Incorporating Green Building Features and Initiatives (GBFIs) into Commercial Property Valuation:
Perceptions of South African Valuers
Saul NurickKaren Le JeuneEmma DawberRyan FlowersJennifer Wilkinson
Department of Construction Economics and Management
University of Cape Town
Source: www.greentechforum.net
Research Question
How familiar is the South African valuation
profession with green building, and are they
taking GBFIs into account when calculating
market value?
Research Proposition
As green building becomes an increasingly
important factor for stakeholders of
commercial properties, it is imperative for
valuers to be able to take into account the
effect on value of GBFIs in their valuation
reports?
Green Buildings
South African Market for Green Building
GBFIs
Applicability of traditional commercial valuation
methods in valuing green building
Green Building Valuation
Green Star rating
Rationale
Green Valuation Issues
Potential Value Impacts
Green Buildings
Research Methods
Findings
Green Building Awareness
Impact of Rating Tools on Value
Experience in Valuing Green
Impact of GBFIs on Market Value
Problems with Valuing Green
Valuation Methods Utilised
Findings
Respondents were asked to rank the problems associated with green valuation
Current vlauation methods are not appropriate for incrporating GBFIs
How green buildings will affect buildings that are not green
Lack of personal knowledge on green
Lack of well defined terminology on green
Some benefits of green building accrue only to the occupier, rather than the developer and owner, and this is difficult to quantify
Lack of standardised, conceptual approach to valuing
Lack of experience in valuing green
Lack of transactional data on green building
0% 20% 40% 60% 80% 100%
18.5%
25.9%
25.9%
29.6%
37.0%
40.7%
40.7%
92.6%
Research Methods
Valuation Simulation
Source: Vunani Property Investment Fund
Valuation Simulation
Valuation Conventional GreenChange
in value
Income Capitalisation
Value
R 30 267 680 R 35 507 120 ↑17.31%
DCF Value R 29 629 074 R 34 762 339 ↑17.33%
Valuation Variables
Net Property Rental
Values/m2R112.38/m2 R127.38/m2 ↑13.35%
Discount rates 15.50% 13.50% ↓2.00%
Applied Capitalisation
Rates10.35% 10.00% ↓0.35%
Exit Yield 10.80% 10.00% ↓0.80%
Net Rental Escalation 5% 3% ↓2.00%
Vacancy 0% 0% -
Change all the valuation variables
Valuation Simulation
Valuation
Conventional
( Refurbished)
GreenChange
in value
Income Capitalisation
Value R 31 327 049
R 35 507
120 ↑13.34%
DCF Value R 31 289 048 R 34 762
339 ↑11.10%
Valuation Variables
Net Property Rental
Values/m2R 112.38/m² R 127.38/m² ↑13.35%
Discount rates 13.50% 13.50% 0.00%
Applied Capitalisation
Rates10.00% 10.00% 0.00%
Exit Yield 10.00% 10.00% 0.00%
Net Rental Escalation 3% 3% 0.00%
Vacancy 0% 0% 0.00%
Change in only Net Rental
Conclusions
There is currently a reluctance by valuers to
incorporate GBFIs in their valuations.
Lack of transactional data is a major contributing
factor.
Energy was identified as the most significant GBFI
in green commercial buildings.
Valuers predict that GBFIs will slowly make an
impact in the future.
Research Partners
Thank you