|
Article Excerpt
To understand the current dichotomy between property appraisal and green buildings, consider two statements by Tim Lowe, MAI, principal of Waronzof Associates in El Segundo, Calif.: "There's virtually no money to be made by appraisers doing green-building valuations," Lowe says. But, "It is the future of all buildings. There's no doubt in my mind."
If so, these questions arise: What place will appraisers have in this new real estate paradigm? Is the appraiser's role limited to green-building valuations? Or is there a greater role to play?
According to many appraisers, opportunities exist for appraisers to get involved with the green-building industry, particularly in the collaborative design stage of a project, if they can get informed about the new industry, learn the language and master the concepts.
"Appraisers know nothing about this," says John O'Dwyer, MAI, president of JSO Valuation Group in Evanston, 111. "And it's shocking."
According to Theddi Wright Chappell, MAI, the National Practice Leader for Cushman & Wakefield's Green Building & Sustainability Practice, and who conducts green-building seminars for the Appraisal Institute: Don't wait until green building is the prevailing practice before getting familiar with it. Don't wait for all the data to be in before getting up to speed. "I think that's mistake" to delay, Chappell warns. "I think you're going to get behind the curve."
Evolving Building Practices
As many observers have recently noted, there is increased focus on sustainable buildings, which generally refers to buildings designed, constructed and operated to save energy, conserve water, conserve resources, and have superior indoor air quality.
Reasons for the shift from standard to high-performance buildings include the decline of fossil fuels; drought and water shortages; asthma, allergies and other environmentally caused illnesses; and concerns over carbon-induced climate change. Add to all that a new administration pushing green building to the top of the priority list, and it's clear why we are in the midst of what Lowe calls "a sea change."
Eventually, some say, there will be no such thing as a "green building." In other words, old-fashioned buildings that waste energy, water and resources will be a thing of the past. At this time, though, the market is not bulging with green commercial buildings held for investment, thus the traditional opportunities for appraisals remain slim. According to a survey conducted by Lowe's company, only 400 commercial buildings in the country that are certified by Leadership in Energy and Environmental Design (LEED)-a prevalent rating system developed by I tie nonprofit U.S. Green Building Council--are held for investment. However, that is up from less than 100 two years ago.
Many more LEED certified buildings have been built by corporations for their own use (Apple, Ford, Herman Miller, etc.) or by the government for municipal or military use, and will seldom if ever get leased or sold.
The trend, though, is that more and more LEED-certified buildings held for investment will come on the market. More than 11,000 buildings registered with LEED are in the pipeline, including many multifamily units. And with the U.S. government's preference for leasing space in buildings with a LEED silver rating (the second level of "greenness" in a four-level system), that trend will surely continue.
Plus, more than 6,000 green buildings are certified by Energy Star--the U.S. government's energy-saving rating system--including more than 2,000 office buildings, and glimmers of data that can be used for appraisal methods are emerging.
A recent research study commissioned by RICS found that U.S. office buildings with an Energy Star rating attracted rental premiums of 3 percent per square foot compared with nearby non-energy-efficient buildings of the same size and function. The study also found that the selling prices of Energy Star-rated buildings were 16 percent higher. (For more information on the RICS study, see page 15.)
The RICS study also discovered, somewhat surprisingly, that LEED-rated buildings did not share the same financial advantage over non-LEED buildings, suggesting that energy savings far surpass the broader green goals (resource conservation, for instance) embodied in LEED buildings. This seems to contradict a 2008 CoStar Green Study that found a LEED rating...
|
