New green rule could boost building's value

A new valuation guideline on green buildings could potentially boost the values of these properties, as valuers take into consideration the structure's income and cost implications.

The income method, for instance, will take into account the enhancements a building may achieve, whether in the form of increased rental or a reduction in operating expenses, as a result of the incorporation or installation of green features and design.

The direct comparison method requires green buildings to be appraised by comparing them to similar green buildings which have been sold, making relevant adjustments for differences.

Studies carried out in various parts of the world on the impact of green buildings on values corroborate this. Specifically, a recent study conducted in the United States found that rents commanded by Energy Star-labelled and LEED-certified properties enjoy a premium of 7-17 per cent and occupancies improved by 10-18 per cent. Selling premium is estimated at $30 and $130 per square foot for Energy Star-labelled and LEED-certified properties respectively.

These figures were cited by Professor Lim Lan Yuan, president of Valuation & General Practice, Singapore Institute of Surveyors and Valuers (SISV), in his speech at the Breakfast Talk for CEOs, which was jointly organised by the Building and Construction Authority (BCA) and SISV, wherein the valuation guideline was introduced.

This is the first time the SISV is publishing a valuation guideline on green buildings, which will be incorporated in their newly revised edition of "Valuation Standards and Practice Guidelines", expected to be launched next month.

While the guideline will assist professionals by providing a framework to investigate and appreciate the tangible and intangible benefits of green features thus translating them into economic values, challenges remain.

Source: Business Times – 13 October 2012