real estate

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.

San Francisco Introduces Energy Efficiency Retrofit Program

he City of San Francisco is paving the way for owners of residential and commercial buildings to conduct green upgrades to their properties through an innovative financing program.  The San Francisco Sustainable Financing Program (SF2) will provide owners with affordable financing for green retrofit projects, with the repayment obligations tied to the property rather than the owner. The loan repayments and interest will be added to the building’s property tax bill, and paid back over the loan period.

Energy-saving upgrades, such as solar installations and replacement heating systems, are often unattractive to owners because they require sizable upfront expense, whereas it takes many years for the benefits from these improvements to accrue in the form of lower energy bills.  In a traditional financing arrangement, the owner who arranges the financing is responsible for future repayments, even if they were to sell the property during the life of the financing. The property tax assessment model takes this problem away and allows owners to invest in the sustainability of their property and enjoy the many benefits that are gained from a cleaner, more efficient and healthier building.

The San Francisco program is based on the PACE (Property Assessed Clean Energy) framework that was pioneered in Berkeley and has since been adopted by municipalities across the nation.  Unlike some other property tax repayment models, which are solely for solar installations, the San Francisco program will also be used for energy efficiency and water conservation initiatives. Under the program terms, participants are required to conduct an energy audit and install energy efficiency upgrades before any renewable energy improvements are allowed.

Also, in contrast to many similar government-funded programs, the San Francisco initiative will be financed using up to $150 million of private capital, plus any available state and federal grants.

Sustainability in Action at Real Estate Services Firm CB Richard Ellis

As one of the leading global real estate services firms, CB Richard Ellis (CBRE) made an early commitment to the promotion of sustainability in real estate, both in its work with clients and in its own operations.  Reflecting this, the firm released corporate responsibility reports in 2007 and 2008 and declared its goal to be carbon neutral in operations by 2010. CBRE's December newsletter, "6 Degrees of Sustainability", provides a good insight to the kind of activities that CBRE is initiating across the green building spectrum. These include:

Real estate professional service firms like CBRE have a key role to play in the promotion of green building practices, and we expect to see that role - and their influence - increasing as sustainability becomes mainstream in the commercial real estate industry.

California’s $3.1bn Energy Efficiency Budget: What’s in it for Commercial Real Estate?

The California Public Utilities Commission (CPUC) last week approved a $3.1 billion budget for energy efficiency programs for the years 2010-2012, a 40% increase over the previous program cycle. The funds will be directed through the state’s publicly owned utilities and are expected to create energy savings of almost 7,000 gigawatt hours, avoid 3 million tons of greenhouse gas emissions and create between 15,000 and 18,000 skilled green jobs.

The $3.1 billion budget includes hundreds of millions that will be available for commercial real estate owners who want to improve their sustainability and who have the smarts to take advantage of the subsidies and incentives that are available.

Never before have there been so many programs, subsidies and incentives available to building owners. Here are five steps to tap into state funds to transform your CRE business from a green laggard to a green leader:

1. Find out your energy efficiency score

The state has ambitious goals to make all new buildings Zero Net Energy by 2030 and achieve major energy reductions in existing buildings...