Green Appraisal Standards

Green buildings first emerged in the late 20th century and are consistently being recognized within today’s market as positive additions to the real estate industry.  Greater energy efficiency not only increases a building’s value by reducing the property’s carbon footprint, but also saves on overall operating costs.  Despite the obvious environmental and economic savings, the real estate industry is currently lacking a consistent mechanism to account for energy efficiency characteristics in the process of determining property value.  This gap leads to imprecise and often inconsistent valuations of commercial properties.

A green real estate appraisal standard would help close this gap by measuring the efficiency and sustainability value of commercial properties, thereby attaching increased asset value to higher-performing buildings.  This would encourage banks to release capital for more energy efficiency projects, since it would be easier to assess property value based on money and energy savings.  Since capital costs are the main barrier for efficiency upgrades and retrofits, creating a standard and getting banks on board would assist in creating new sources of funding in the efficiency arena.

A building performance data tracking system would also give appraisers a resource for comparable projects. Stakeholders from energy, financing, appraisal, and real estate service industries are currently lacking consistent data about the monetary and energy efficiency benefits of higher performing buildings.  A green appraisal standard will provide these stakeholders with a consistent methodology to assess properties’ energy efficient and sustainable features in determining market value.  This improved standard and data system would also provide incentives for greater investment opportunities into efficiency. Since green building has become such a positive trend, why not add standards that will boost funding sources for efficiency projects and bolster green jobs?

Currently, the U.S. Green Building Council, Natural Resources Defense Council (NRDC) and the Real Estate Roundtable’s Sustainability Policy Advisory Committee (SPAC), have made it a top priority[1] to establish a green real estate appraisal standard.  Through a public comment process, they continue to press the Obama Administration to use their existing legal authority to establish these green standards.

Let us know what you think about a green appraisal standard.