Chapter 2
Value of Environmental Building Features
Strengthening Value Through ESG
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CBRE’s survey revealed the importance of certain environmental building features on property values and transaction decisions. Our goal was to determine what features that occupiers and investors would pay a premium for, or the absence of which would cause them to seek a discount or reject a transaction altogether.
Figure 8: How Environmental Building Features Impact a Real Estate Transaction
Source: CBRE Global ESG Survey, November 2022.
Note: Total Impact = If present, we’d consider paying a premium + If absent, we’d seek a discount + If absent, we’d exit from or reject the building.
Building Features Dashboard
Which environmental and social building features have the most impact?
Reducing energy
consumption a priority
84% of respondents cite features that reduce energy
consumption as having an impact on real estate decisions.
Almost half of respondents would seek a discount or walk away
from a deal altogether if a building lacked these features.
Features that reduce energy consumption are most important when evaluating a property transaction. Investor and occupier sentiment is somewhat split between respondents who would pay a premium vs. seek a discount if a building had or lacked features that reduce energy consumption. Occupiers appear most likely to reject buildings without such features, likely because of less ability to demand them once a lease is signed.
More than half of survey respondents are willing to pay a premium for buildings that already have on-site renewable energy generation and/or smart technology that adjusts building operations to reduce environmental impact. This sentiment is led by investors who might have to invest significant capital to make these improvements if they were not already present.
As they did for instituting ESG initiatives, rising energy prices and government regulation most likely influenced respondents’ choices of which environmental features they consider most important when valuing a transaction.
Figure 9: How would the presence or absence of the following energy-related green building features change your company’s real estate decisions?
Source: CBRE Global ESG Survey, November 2022.
Over 85% of the EU existing buildings will still be in use in 2050. Renovating the existing building stock is an essential action to meet Paris Agreement goals. To ensure assets remain desirable in the future, owners need to plan on the renovation of their assets. Renovation will reduce the carbon emissions of their properties and will enhance the quality of life for occupants.
Green building certifications
draw premiums
79% of respondents cite green building certifications
as having an impact on real estate decisions. Almost
half of respondents would pay a premium
for green certified buildings.
Green building certification is cited as a top factor that could positively impact a real estate transaction. This is especially true in Europe and Asia-Pacific, where green certification is also required for regulatory purposes. In the U.S., these certifications command office rent premiums. After controlling for age, size, renovation and location, LEED-certified buildings generally earn a 3.7% rent premium over their non-LEED-certified peers. In Europe, the premium is 5.5% for office buildings with sustainability certifications.
Figure 10: How would the presence or absence of green building certification change your organization’s real estate decisions?
Source: CBRE Global ESG Survey, November 2022.
Role of sustainability certifications
Figure 11: Sustainability certifications across the globe
Source: CBRE Global ESG Survey, November 2022.
Seventy-one percent of investors and 58% of occupiers say that green building certification programs are important to benchmark building performance. Investors also reported using these certifications to enhance their building’s brand and marketability to prospective tenants. Asian and European respondents more heavily rely on these certifications for regulatory purposes.
Figure 12: How do you use sustainability certification programs (e.g., LEED, BREEAM, NABERS) in your decisions?
Source: CBRE Global ESG Survey, November 2022.
Building resilience
to climate change
75% of respondents cite a building's resilience to
effects of climate change as having an impact on real
estate decisions. Nearly 40% would pay a premium
for a building with superior resiliency.
Three-quarters of respondents said that they would consider the effect of climate change on a building they were investing in or leasing. Nearly 40% would pay a premium for a building with superior resiliency, while 22% would seek a discount for a building without superior resiliency. With natural disasters becoming more of a common occurrence, building resiliency is a growing concern.
Figure 13: How would a building’s resilience to effects of climate change impact your organization’s real estate decisions?
Source: CBRE Global ESG Survey, November 2022.
Investors need to take a holistic approach to climate change by incorporating both transition and physical climate risks into their strategies; otherwise, they will likely incur a substantive financial impact on their real estate investments.
Although many respondents would pay a premium for climate-resilient buildings, current decision-makers don't seem primarily focused on future-proofing their asset. Those making climate-related decisions about buildings in the past year are more focused on how building performance can help mitigate climate change vs. how the building will be affected by climate change. Almost 75% made decisions in the past year based on the building’s potential to meet regulatory requirements for energy, followed by 58% who cited a focus on improving energy consumption data and 58% on commissioning voluntary building certifications.
These decisions directly correlate to the high value placed on building features that reduce energy consumption. The six most common decisions by occupiers and investors have been prioritized in the same order, suggesting that their ESG priorities are closely aligned. More investors report acting on these decisions than occupiers over the past year, signaling the heightened focus investors put on ESG priorities in 2022.
This presents an opportunity for collaboration between occupiers and owners to achieve their mutual priorities through expanded use of green lease clauses, which include operational procedures that advance efficient and carbon neutral buildings.2
Most important climate-related building decisions:
Figure 14: Regarding climate change, which of the following types of decisions about buildings has your organization made in the past year?
Source: CBRE Global ESG Survey, November 2022.
Related Insights
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Report Contacts
Contributors
Dylan McCrory
Managing Director, Workplace Technology Services Project Management
Research Leadership
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