Energy-efficient buildings on top
As they net better investment returns than traditional buildings.
Over the last eight years, the jury was still out on whether energy-efficient buildings delivered better investment returns than those built to traditional standards.
Up until recently, energy-efficient buildings were said to have better investment fundamentals, but there was a dearth of research to back this up.
But over the last two years, further research has been conducted and is now shedding light on the matter.
In fact, the latest research by the Investment Property Databank (IPD) and the Green Building Council of South Africa (GBCSA) points to energy-efficient commercial buildings being better investments. The research is now in its second year.
The results of the research for the year to December 31 2014, indicate that energy-efficient buildings have higher net income growth and capital value per square metre and higher occupancy levels compared with less efficient buildings.
Vice President of MSCI-owned IPD South Africa Phil Barttram, says energy-efficient buildings consume less energy and water per annum. This is an indication that landlords and occupiers are spending less on operational costs at an energy-efficient building.
The study tracked performance of the 597 most energy-efficient buildings (referred to as the top quartile efficient), which are benchmarked with about 1600 buildings that are not as energy efficient (referred to as the rest of the IPD universe).
The water and energy use of buildings in both categories were pitted against each other.
The buildings had a collective value of R167 billion in excess of 20 million square metres. “It represents over 60% of professionally invested commercial property market in South Africa and we have been collecting the data since 1995,” says Barttram.
Property funds like Emira Property Fund, Delta Property Fund, Growthpoint Properties, Hyprop Investments, Liberty Property, Old Mutual Property, Pareto Limited, Attacq Limited, SA Corporate Real Estate Fund and Vukile Property Fund contributed to the study.
Even on an investment perspective, green buildings are getting better total returns than buildings that are not as efficient.
According to the research, buildings in the top quartile efficient netted total returns of 12.1% compared with buildings in the IPD universe which recorded total returns of 9.4% in one year.
South Africa has over the years rapidly adopted the green building movement in light of the country’s worsening energy crisis, with rolling power outages now seemingly a part of daily life.
In fact, US-based McGraw-Hill Construction in its World Green Building Trends survey notes that South Africa’s adoption of green building trumps most developed regions which include Europe, Australia, the United States, the United Arab Emirates, Singapore and Brazil.
While South Africa is only playing catch-up to its developed and developing counterparts, the survey expects the country’s take up of green building to grow three-fold, from a measured 16% in 2012 to 52% by 2015.
When South Africa’s green building movement started in 2007, the GBCSA only certified one building, but now 100 buildings are certified. “This is a clear sign that green building has gained rapid momentum in South Africa. The Green Star certified projects have also demonstrated world-class, innovative implementations that benefit people, planet and profit,” says GBCSA CEO Brian Wilkinson.
Associate and sustainability consultant at WSP Africa Alison Groves supports Wilkinson’s views saying there is now a deep understanding of the benefits of green building.
Green initiatives – such as replacing conventional light systems with energy efficient lighting, upgrading chillers, investing in rain harvesting technology, waste disposal, solar panel heating – have been largely driven by tenants in buildings.
“Tenants understand that they would rather pay more in their square metres and reduce their risks in terms of energy costs. Those tenants are demanding green buildings because they see the benefits of going green,” Groves says.