Translating Energy Efficiency Investments into Real Property Values

Courtecy Natural Resources Canada

Do energy efficiency improvements affect property values – and how? Good question – and one that is getting more and more attention.

Investing resources in energy efficiency, especially capital costs, typically raises concerns about the return on that investment. The return can be looked at from many perspectives, such as actual energy use, energy costs, air quality and occupant well-being, community image and corporate social responsibility. And, in a chicken-egg conundrum, property valuation influences lenders’ decisions for loans related to energy efficiency.

So, another aspect is now being considered: real property value. There are no widely accepted standards or metrics – nationally or internationally – around this issue but the groundwork is being laid in several countries, including Canada, and through international networks, including the following:

  • The Green Property Alliance in the United Kingdom (UK) has recently published Establishing the Ground Rules for Property: Industry-wide Sustainability Metrics. This 2010 report, from a multistakeholder working group, is an examination with recommendations for a national consensus on performance indicators for buildings’ sustainability.

  • The Royal Institution of Chartered Surveyors (RICS), a recognized UK-based international organization, is also addressing the complexity of translating energy efficiency and sustainability improvements into real property valuations. Its recent report Sustainability and Commercial Property Valuation (available only to RICS members) identifies several sustainability characteristics: former and current land use; sustainability of building materials; efficiency of space and resources; water conservation and waste management practices; accessibility by car, transit or bicycle; use of renewable energy; adaptability for different occupants or uses; and contributions to occupant health and well-being. Refer to the presentation Sustainability & Property Value in the RICS Climate Change series.

  • The Green Building Financing Consortium (GBFC), a United States (US) research and education enterprise, published Value Beyond Cost Savings: How to Underwrite Sustainable Properties in 2010. The report states, “The failure by property investors to appropriately incorporate revenue and risk considerations into sustainable investment decisions has led to underinvestment in sustainability.”

  • The U.S. Appraisal Institute offers a classroom seminar called An Introduction to Valuing Commercial Green Buildings. The course description says: “Get the latest information on a market projected to reach $60 billion by 2010 … [S]tudents will explore cost-benefit analysis, analyze the relevance of green features in the market, evaluate construction costs, and become familiar with design principles.”

  • The 2007 Vancouver Valuation Summit generated a signed memorandum to make “green” part of property appraisal standards and, in turn, to better inform decisions by lenders. Signatories included the following:
    • Premier of British Columbia
    • Appraisal Institute of Canada
    • Royal Institution of Chartered Surveyors
    • World Green Building Council
    • Canada Green Building Council
    • U.S. Green Building Council
    • Union of PanAmerican Valuers
    • BC Hydro
    • BLJC Workplace Solutions Inc.
    • Town of View Royal

Calendar of events

The Calendar of Events for Buildings is updated monthly. It lists energy efficiency conferences and training opportunities across Canada, including dates and locations for the 2010 Dollars to $ense workshops.

The following list highlights key events: