22 Jul The Value of Energy Efficiency for Building Owners in the 21st Century
It’s time that building owners realize incorporating the narratives of sustainability as a financial incentive and not a regulatory compulsion. Intelligent business considerations, along with regulatory requirements are continually driving the real estate owners and investors to better understand the functioning and narratives of building energy performance because of its deep impacts on the valuations.
Additionally, being energy efficient massively (and positively) affects the buildings’ Net Operating Income (NOI). Energy efficiency can also exponentially increase asset value because such measures lower energy consumption, and reduce operating costs. Studies further substantiate that highly rated energy-efficiency properties are sold at all-time premium prices by helping sustain the following:
• Reduced operating costs
• Higher Valuation
• Premimum rental rate
• Lower vacancy (Improved tenant acquisition & retention)
• Reduced risks of exposure to future energy price volatility
• Lesser risk of obsolescence
1. Energy Efficiency Increases Property Values & The Ease of Re-Selling
Research-based evidence suggests that individuals and businesses are willing to pay the highest of rents and prices for properties that are energy-efficient because of their optimized energy performance. According to a research conducted by the Australian Property Institute on the US green office buildings, the overall prices of the ‘certified’ green buildings were much higher. Compliance with the green narratives is a key motivator for investors to undertake deep reftrofits.
Furthermore, studies conducted in Masachusetts have also found that property values increments because of being energy efficient were as high as USD 2000 per utility! The average estimate of increment in the United States is that od 10%. Moreover, government tenants are being recommended to look for green certificates such as NABERS.
2. It Helps Stay Relevant – Internationally
Denmark introduced energy performance ratings for buildings back in 1997. It was undoubtedly one fo the first countries to be energy conscious. However, as per the study conducted by Jensen et al, energy ratings did not impact the real estate until 2011. The key factor in increasing values in the highly rated green properties was the EU Directive on mandatory advertisement of energy performance though Article 13. It had an immensely positive effect on the buildings during sales.
3. Energy Efficiency Increases the Utility Asset Value
The value of utilities can be increased through strategic energy efficiency improvements that aid the reduction of demand while increasing the life of the said utility assets. A special niche of iinvestment in the energy efficiency landscape – utility investment, when reduces energy demands increases the value of current assets by compressing future needs thereby increasing energy capacity for a backup generation.
4. Commercial and Industrial Asset Values are Increased
Energy efficiency is not only about the addition of newer and greener advancements, it is also the proper utilisation of the pre-existing mechanism. With improved productivity and capacity utilisation, manufacturing businesses particularly can achieve increased asset value. The same can also be achieved through other measures that extend the life of the assets with newer technologies that reduce or control the wear on energy consuming mechanical assets and delay the capital expenditures to replace equipment.