scholarly journals A Review of the Impact of Green Building Certification on the Cash Flows and Values of Commercial Properties

2020 ◽  
Vol 12 (7) ◽  
pp. 2729 ◽  
Author(s):  
Niina Leskinen ◽  
Jussi Vimpari ◽  
Seppo Junnila
Keyword(s):  
Green Building ◽  
Cash Flows ◽  
Commercial Real Estate ◽  
Property Value ◽  
Real Estate Markets ◽  
Property Valuation ◽  
Valuation Method ◽  
Strong Focus ◽  
Green Certificates ◽  
The Impact

This study aims to review empirical research concerning the impact of green certificates on property cash flows and values, particularly from professional property investors’ perspective. The study uses discounted cash flows (DCF), a widely used property valuation method in income-generating properties, as a methodological framework. In this study, over 70 peer-reviewed studies were identified, categorized, and analyzed in the DCF framework. The reviewed studies indicated that certificates might increase the rental income and decrease the operating expenses, vacancy, and risks of a property. Together with the brand value of certificates, these enhancements should lead to an increase in property value. The number of studies has grown rapidly during the 2010s. Lately, studies have developed from asset-level to portfolio-level examinations. Although the reviewed studies found certification to be beneficial, the range of reported benefits was wide, and over half of the studies concentrated on U.S. commercial real estate markets, with a strong focus on LEED and ENERGY STAR certificates. From a property valuation perspective, applying these results to other markets and certificates might be challenging. Property values that fully reflect the environmental performance of properties would be a key to motivate mainstream investors to adopt sustainable property features.

scholarly journals The impact of lease structures on the optimal holding period for a commercial real estate portfolio

2015 ◽  
Vol 33 (2) ◽  
pp. 121-139 ◽  
Author(s):  
Charles-Olivier Amédée-Manesme ◽  
Michel Baroni ◽  
Fabrice Barthélémy ◽  
Mahdi Mokrane
Keyword(s):  
Real Estate ◽  
Portfolio Management ◽  
Cash Flows ◽  
Commercial Real Estate ◽  
Content Type ◽  
Holding Period ◽  
Specific Risk ◽  
The Impact ◽  
Real Estate Assets ◽  
Rental Value

Purpose – The purpose of this paper is to demonstrate the impact of lease duration and lease break options on the optimal holding period for a real estate asset or portfolio. Design/methodology/approach – The authors use a Monte Carlo simulation framework to simulate a real estate asset’s cash flows in which lease structures (rent, indexation pattern, overall lease duration and break options) are explicitly taken into account. The authors assume that a tenant exercises his/her option to break a lease if the rent paid is higher than the market rental value (MRV) of similar properties. The authors also model vacancy duration stochastically. Finally, capital values and MRVs, assumed to be correlated, are simulated using specific stochastic processes. The authors derive the optimal holding period for the asset as the value that maximizes its discounted value. Findings – The authors demonstrate that, consistent with existing capital markets literature and real estate business practice, break options in leases can dramatically alter optimal holding periods for real estate assets and, by extension, portfolios. The paper shows that, everything else being equal, shorter lease durations, higher MRV volatility, increasing negative rental reversion, higher vacancy duration, more break options, all tend to decrease the optimal holding period of a real estate asset. The converse is also true. Practical implications – Practitioners are offered insights as well as a practical methodology for determining the ex-ante optimal holding period for an asset or a portfolio based on a number of market and asset-specific parameters including the lease structure. Originality/value – The originality of the paper derives from its taking an explicit modelling approach to lease duration and lease breaks as additional sources of asset-specific risk alongside market risk. This is critical in real estate portfolio management because such specific risk is usually difficult to diversify.

scholarly journals VALUE INFLUENCING MECHANISM OF GREEN CERTIFICATES IN THE DISCOUNTED CASH FLOW VALUATION

2014 ◽  
Vol 18 (3) ◽  
pp. 238-252 ◽  
Author(s):  
Jussi Vimpari ◽  
Seppo Junnila
Keyword(s):  
Cash Flow ◽  
Scientific Literature ◽  
Property Value ◽  
Discounted Cash Flow ◽  
Property Valuation ◽  
Valuation Model ◽  
Influencing Mechanism ◽  
Green Certificates ◽  
Industry Professionals ◽  
Discounted Cash Flow Valuation

The market value of green properties is already acknowledged in scientific literature, but it has still remained unclear how green certificates are incorporated into property valuation. In this study, value influencing mechanism of green certificates in property investment is studied. A widely used discounted cash flow (DCF) model for property valuation was constructed and communicated with spreadsheet to industry professionals for valuing an office property in metropolitan Finland. The goal was to understand the value influencing mechanism and even deeper to identify the differences in DCF parameters between certified properties and non-certified properties. The results show that a green certificate increases on average the property value with 9.0% in the DCF valuation model. Improved yield and net rental income were the main reasons for the higher property value. Interestingly, this is the first known study to empirically open the value influencing mechanisms of green properties presented in earlier theoretical studies.

Bricks, mortar, and proptech

2020 ◽  
Vol 38 (4) ◽  
pp. 327-347 ◽  
Author(s):  
Albert Saiz
Keyword(s):  
Real Estate ◽  
Business Models ◽  
New Technologies ◽  
Cash Flows ◽  
Commercial Real Estate ◽  
Content Type ◽  
Real Estate Markets ◽  
New Business ◽  
It Revolution ◽  
New Business Models

PurposeDigital and information technologies (IT) are becoming silently pervasive in old-fashioned real estate markets. This paper focuses on three important avenues for the diffusion of IT in commercial real estate: online brokerage and sales, the commoditization of space and Fintech in mortgage and equity funding. We describe the main new markets and products created by this IT revolution. The focus is on the pioneering US market, with some attention devoted to the specific firms and institutions taking these innovations into the mainstream. We also carefully analyze the economic underpinnings from which the new technologies can expect to generate cash flows, thus becoming viable—or not. Finally, we discuss their likely impact on established players in the commercial real estate arena.Design/methodology/approachIn this paper, the author chooses to focus on three separate arenas where the IT revolution—sometimes referred to as Proptech, as applied to real estate—is having discernible impacts: sales and brokerage, space commoditization and online finance platforms. The author invites the reader to think seriously about the economic fundamentals that may—or may not—sustain new business models in Proptech. Real estate economists and investors alike need to be critical of new business models, especially when they are being aggressively marketed by their promoters. Trying to avoid any hype, the author provides thoughts about the likely impact of the innovations on their markets, guided by economic and finance theory, and previous experience.FindingsThe author evaluates the evolution of commercial real estate brokerage. While innovations will, no doubt, have an impact on the ways in which we buy and lease commercial properties, the lessons from the housing market should make us skeptical about the possibility of the new technologies dramatically facilitating disintermediation in this market. In fact, new oligopolies seem to be emerging with regard to market data provision.Practical implicationsProptech will change some aspects of the real estate industry, but not others!Originality/valueAs change pervades the property industry, only a relatively few research pieces are illustrating or—more importantly—providing insights about the likely economic and financial impacts of IT penetration. Similarly, only a few papers have so far addressed the economic viability of the alternative business models of tech startups targeting real estate markets and transactions.

THE LEGAL REQUIREMENTS OF APPROPRIATE HERITAGE PROPERTY VALUATION METHOD

2021 ◽  
Vol 19 (17) ◽  
Author(s):  
Junainah Mohamad ◽  
Suriatini Ismail ◽  
Abdul Rahman Mohd Nasir
Keyword(s):  
Public Service ◽  
Thematic Analysis ◽  
Reliable Method ◽  
Economic Indicator ◽  
Property Value ◽  
Legal Requirements ◽  
Legal Documents ◽  
Property Valuation ◽  
Valuation Method ◽  
International Laws

Heritage property value is an important economic indicator to a country. Thus, it is imperative that the value is derived from an accurate and reliable method of valuation. However, in Malaysia, there are no specific standards that can be referred to for conducting an assessment for heritage property valuation. Thus, this paper fills the gap by reviewing five provisions of the Malaysian laws and four provisions of the international laws that are related to heritage property valuation. Thematic analysis of the documents is undertaken by using five keywords that relate to heritage property valuation, namely: definition, factors, method, procedure and type of values. Out of nine legal documents analysed, Valuation of Specialised Public Service Assets has the most information needed as a guidance for heritage property valuation.

scholarly journals SEM-PLS Approach to Green Building

Encyclopedia ◽  
2021 ◽  
Vol 1 (2) ◽  
pp. 472-481
Author(s):  
Nasim Aghili ◽  
Mehdi Amirkhani
Keyword(s):  
Structural Equation ◽  
Green Building ◽  
Well Being ◽  
The United States ◽  
Assessment Method ◽  
Assessment System ◽  
Renewable Materials ◽  
Sustainable Building ◽  
Building Operation ◽  
The Impact

Green buildings refer to buildings that decrease adverse environmental effects and maintain natural resources. They can diminish energy consumption, greenhouse gas emissions, the usage of non-renewable materials, water consumption, and waste generation while improving occupants’ health and well-being. As such, several rating tools and benchmarks have been developed worldwide to assess green building performance (GBP), including the Building Research Establishment Environmental Assessment Method (BREEAM) in the United Kingdom, German Sustainable Building Council (DGNB), Leadership in Energy and Environmental Design (LEED) in the United States and Canada, Comprehensive Assessment System for Built Environment Efficiency (CASBEE) in Japan, Green Star in Australia, Green Mark in Singapore, and Green Building Index in Malaysia. Energy management (EM) during building operation could also improve GBP. One of the best approaches to evaluating the impact of EM on GBP is by using structural equation modelling (SEM). SEM is a commanding statistical method to model testing. One of the most used SEM variance-based approaches is partial least squares (PLS), which can be implemented in the SmartPLS application. PLS-SEM uses path coefficients to determine the strength and significance of the hypothesised relationships between the latent constructs.

scholarly journals User Experience of Green Building Certification Resources: EarthCraft Multifamily

2021 ◽  
Vol 13 (14) ◽  
pp. 7871
Author(s):  
Dwayne Jefferson ◽  
Frederick Paige ◽  
Philip Agee ◽  
France Jackson
Keyword(s):  
User Experience ◽  
Affordable Housing ◽  
Green Building ◽  
Interview Data ◽  
Project Delivery ◽  
Heuristic Evaluation ◽  
Sustainable Infrastructure ◽  
Evaluation Data ◽  
Environmentally Responsible ◽  
The Impact

To improve the construction industry’s capacity to deliver sustainable infrastructure, guidance on delivering green building systems needs to be more usable. Green buildings have certifications and ratings in place that ensure that projects are environmentally responsible and meet standards in resource efficiency. EarthCraft Multifamily (ECMF), an evolving green building certification, has been successful in increasing the delivery of energy-efficient affordable housing, and this study leverages user experience (UX) methodologies to understand how to further improve ECMF and replicate its success. This study identifies the impact ECMF tools and resources, such as the program manual, worksheet, and technical guidelines, have on enhancing project delivery for architects. This study conducted data analysis on project specifications, heuristic evaluation data, and stakeholder interview data. As the strengths and weaknesses of ECMF were identified, knowledge on the usability of the green building certification program was unveiled. Heuristic evaluations data show that accessibility and usability issues are present in ECMF resources. Interview data show that architects’ experiences with ECMF resources were affected by some of the usability issues identified in the heuristic evaluation data. Coded interview transcripts show the most prominent participant-identified improvements represented within the data. Resources need appropriate visual representation such as readability and hierarchy to improve their usability. Understanding how ECMF resources are utilized during project delivery allows for the appropriate content and options to be strategically framed to improve accessibility and enhance user decision making. ECMF resources can allow for the inclusion of a broader set of stakeholders by lowering the level of expertise required for sustainable infrastructure delivery.

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