Investment experts: Green buildings give investors the highest return

The commercial potential in building green is pushing sustainability up the agenda in the real estate sector. At a COWI Insight Seminar, key note speakers pointed to indoor environmental quality being the next big trend. COWI presented a new tool to capitalize on the green benefits.

03.02.2017

Certified sustainable buildings are not only better for the climate than non-certified buildings. They also hold a range of benefits for the people using them such as comfort, better health and higher productivity, which have a positive impact on the commercial value of the buildings.

These are some of the conclusions in recent international studies of the real estate market in countries like the US, Australia and Finland.

The positive relationship between sustainability and higher return of investment has also caught the attention of the most progressive investors, said Dr Steve Fawkes at this week’s Insight Seminar at COWI’s head office in Denmark.

”We're seeing more investors who want to deploy capital into sustainability, because they believe in it, but more importantly because they recognise it holds an investment opportunity which can make them money,” he stated.
Focus on performance – not capital value

Nils Kok, a leading real estate economist from Maastricht University in the Netherlands, also spoke at the seminar, and he shared some of the results from an extensive survey of the US real estate market. According to the survey, certified green buildings give a three per cent higher income on rent, seven per cent higher cash flow and 13 per cent higher transaction price compared to non-certified buildings.

But if the commercial potential is so obvious, why are more investors and contractors not already chasing the business opportunity in green buildings, one of the participants wanted to know.

”I think the main obstacle is traditional conservatism, especially in construction and design. It has partly to do with the incentive mechanism as engineers and architects are traditionally paid in relation to the capital value of the project. That does not drive the right behaviour; it drives bigger projects,” said Fawkes, who pointed to a performance-based incentive structure as the way forward.

”How well is the building performing on parameters like for instance indoor environmental quality, which we know has an impact on health and productivity – this is what tenants and investors should be looking at,” said Fawkes.
New investment tool to capitalize on green benefits

Nils Kok believes that the indoor environmental quality will become the next big trend in the green building sector, because more data and evidence are available proving a close relationship between health and the environmental conditions inside the buildings:

”However, we still need a set of standardised metrics and an understanding of what indoor environmental quality really is and how we can quantify it. Can we come up with a rating from A to G for instance like we have for energy, then we can also start communicating it to tenants and to investors,” said Kok.

COWI has taken a step in that direction. At the Insight Seminar, Project Director Per Stabell Monby presented a new investment tool capitalizing some of the benefits related to green buildings, among others the value of higher productivity caused by better indoor environmental quality.

Hear Professor Nils Kok from Maastricht University give his estimate of future trends in green building