Sustainable buildings – the competitive advantage?

One of my colleagues, Craig Straw, spoke at an Investment Property Forum conference at Nottingham Trent University a couple of weeks ago. The theme was whether sustainable buildings are gaining a competitive advantage in the current marketplace. I have blogged about the relative value tests on sustainable / non-sustainable buildings here.

My view was – and still is – that there is no visible or tangible price differential at the moment. If there is it is marginal. The latest IPD study published last week suggests that environmentally sustainable properties have underperformed their less “green” counterparts by 4% since the first quarter of 2008. The IPD UK Sustainability Property Index (ISPI) reveals that for the properties examined in the 11 quarters to Q3 2010, “less” sustainable properties delivered a cumulative total return of -10.8%, compared with -14.9% for more sustainable properties.

But the conference suggested a slightly different ‘take’ – that sustainable buildings have a competitive advantage over other properties. It seems that there may be some evidence that sustainable buildings might be emerging as more attractive. It is fair to say that they will have more protection against future obsolescence. Provided they differentiate green bling and truly sustainable features.

My personal view is that if this is a trend then this will start to feed through to values. But valuers do look back (we don’t ‘make’ a market – we just report on what is has done) and this will take some time to drip feed through.

My guess – as I pointed out at the HS2 conference a few weeks ago, is that it is the next generation (our kids and theirs) will start to drive this green agenda.

And perhaps the next generation are now getting into management / ownership positions where they can influence buying decisions.

What is also clear though is that building owners are having to find ways of making their property more attractive in a difficult market. Having green credentials is one of those factors which may well be able to help…

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5 comments on “Sustainable buildings – the competitive advantage?

  1. Speaking from my 1st hand experience of building and then running the visitor centre at Attenborough – two comment spring to mind:
    1. The building was, and remains, very cheap to heat. 4kW of heat pump is sufficient for 400 sq m building. Main reason for this: INSULATION INSULATION INSULATION. 300mm top, bottom and all sides. No point in producing lots of “green energy” if it’s all allowed to seep out again. This is where the whole future energy strategy should start.
    2. Clients wanted to book the conference facility at Attenborough – not only for the view – but also because they felt they were supporting a worthwhile concern and that they could say that they held their meetings in an eco-friendly facility (even if they had to drive twice as far to get there!!!)

  2. Phil – fair points. To some extent it is your second point that is the thing that is emerging – that the demand and perception of buildings is going to drive the value. At the moment the evidence does not show any increase (in fact it show the opposite). But as the next generation start to wield their influence they may well shift behaviour and thus value…. Tim

  3. To take Phils point,as a (very satisfied) user of Attenborough, the USP really is in the excellent design (Groundworks I think) location and staff. Whilst the green bit is not an overt part of my buy decision, perhaps we should start to expect excellent design to “automatically” address sustainable issues….much as you would expect hot running water and an inside toilet.

    • Nick, we certainly will have to incorporate green credentials in buildings as the Building Regulations work their way towards zero carbon design…

      I like the building too – which is odd, because normally if you like it I hate it!

  4. Pingback: Green Deal Edges Closer | Freeth Cartwright LLP Real Estate

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