By Tina Perinotto
30 November 2011 – The PCA/IPD Green Property Investment Index released today shows again that green buildings are better for the bottom line.
The latest figures focus on capital values. Buildings NABERS Energy ratings between four and five stars perform about 3 per cent higher than similar prime buildings with low ratings between 0.5 to 3.5 star NABERS ratings.
In the short term – the past 12 months – average capital values of the higher rated buildings are about $7100 a sq m, compared with an average of $6900 a sq m for the lower rated category buildings.
- See our list of previous articles on IPD’s green building investment performance index
The better performance is not evident over the medium term.
“Over a three year period, capital values for both high-rated assets and low-rated assets are at similar levels, IPD research manager IPD Australia and New Zealand Peter McGuinness, said.
“The major capital value uplift is evident over the year to September 2011, with high rated assets showing a significant increase in values when compared to low rated assets.”
The results clearly showed increasing demand for these assets within the prime office segment and the need for owners to ensure their buildings remained competitive, Mr McGuiness said.
“Owners who improve the sustainability attributes of their buildings are more likely to experience relatively stronger growth in capital values.
“Remaining competitive in the prime office segment will become increasingly difficult with low rated NABERS Energy buildings.”
Better performance through the lows
IPD also pointed out that high rated NABERS Energy assets outperformed low rated assets throughout the trough of the property investment cycle and that the outperformance profile was “consistent throughout the recovery phase and into the recent period of positive capital returns.”
Currently, the pace of recovery is moderating, with high rated assets continuing to outperform, Mr McGuiness said.
“Consistent outperformance in capital returns through the trough and recovery phase of the property investment cycle clearly indicates strong demand for high rated assets.
“The results show that buildings with high ratings demonstrate stability in capital values which mitigates downside risk in asset values.”
The PCA/IPD Green Property Investment Index tracks the investment performance of commercial office buildings that have been awarded an environmental performance rating from Green Star, NABERS Energy and NABERS Water.
The Index currently represents A$47.7 billion of office buildings, reflecting around 86 per cent of office assets by value in the IPD database.