Sustainability and the effect on commercial property values

There are many definitions for sustainability but the most highly recognised by those in the property world and government is from Brundtland Commission report ‘Our Common Future’ 1987 – “Development that meets the needs of the present without compromising the ability of future generations to meet their own needs”. 

Despite this definition being widely recognised, valuers and stakeholders may interpret the concept of sustainability differently and also likely have opposing opinions on what the main issues are that affect a properties sustainability. The way a building performs is determined by many factors, such as its location. If there are there good transport links it means employees do not have to drive to work producing harmful emissions; if the design of the building is one that promotes air flow and is well insulated it will reduce the need for so much heating and air conditioning; some materials are more sustainable than others, this includes the distance the materials have travelled, the length of their ‘life’ and how much carbon they contain. 

It is of course very difficult to value a sustainable property because it’s hard to quantify value of each of these elements; currently valuers use comparable evidence from other deals. In an ideal world you would have a two properties in the same location and of the same size, in fact the same in every way apart from one their sustainable performance. You could then compare evidence and determine whether investors or tenants paid more for sustainable properties. However, it is not as simple it this as future performance must be taken into account – this can be difficult to quantify for a variety of reasons, such as changing laws and regulations and the unpredictability of the future; and could leave valuers open to future scrutiny by the law.

This news was brought to you by Morgan Pryce, a specialist tenant acquisition agent with offices in Oxford Circus and the City. Morgan Pryce specialises in search, negotiation and project management and works exclusively for tenants.