Meins, E; Wallbaum, H; Hardziewski, R and Feige, A (2010) Sustainability and property valuation: A risk-based approach. Building Research & Information, 38(3), pp. 280-300. ISSN 0961-3218
Abstract
The proportion of sustainable property in the total building stock remains small. One reason is that the financial added value resulting from sustainability is not sufficiently taken into account in property valuation due to the tendency of valuations to lag behind market trends. Quantitative information is provided to integrate those aspects of sustainability relating to value into valuations and thereby contribute to the reduction of valuation lag. The Centre for Corporate Responsibility and Sustainability (CCRS) Economic Sustainability Indicator (ESI) measures the risk of property to lose value and the opportunity to gain value due to future developments (e.g. climate change or rising energy prices). Five groups of value-related sustainability features were identified: flexibility and polyvalence; energy and water dependency; accessibility and mobility; security; and health and comfort. By minimizing the risk of loss in value through future developments, those sustainability features contribute to the property value. Their effects on property value were quantified by risk modelling. As an indicator for future-oriented property risk, the ESI is integrated into the discount rate of discounted cash flow valuations. The approach was tested for plausibility and practicability on more than 200 properties.
| Item Type: | Article |
|---|---|
| Uncontrolled Keywords: | discounted cash flow; economic sustainability indicator; property valuation; risk model; sustainability; sustainability features; sustainable buildings |
| Index terms: | modelling, climate change, sustainable building, economic sustainability, comfort, building stock, discounted cash flow, property value, accessibility, added value, mobility, corporate responsibility |
| Subjects: | financial analysis, infrastructure and transport systems, asset management, occupational health and safety management, sustainable construction, inclusive design, economic analysis, analytical methods, real estate economics, climate science, business |
| Topics: | Sustainability, Governance, Research Practice, Engineering Principles, Business Strategy, Cost Management, Health and Safety, Design Practice, Urban Studies |
| Descriptive scope: | 3 PCT |
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