“Energising Valuation in Europe” – How does cost of

Transcription

LuxReal New Years Reception and Forum, January 20th 2010, Luxembourg
www immovalue org
www.immovalue.org
“Energising Valuation in Europe” –
How does cost of energy affect your Real
Estate Business
Dr. rer. pol. Sven Bienert MRICS
Director und Head of Real Estate Advisory Services
Services, Austria
KPMG Financial Advisory Services GmbH
Supported by
Bienert – How does cost of energy affect your real estate business
Green Value vs. Market Value
A Green Building is a property that uses
resources efficiently,
y reduce waste and
CO2 emission, provide superior indoor air
and other qualities, and avoid negative
social impacts.
Energy efficiency is therefore part of the
various green building features.
A Green Value is the net value added
obtainable by a green property in the
market
k t compared
d to
t a non-green peer
group.
According to the definitions of green and
market value it can be assumed that the
green value is an integral part of the
overall market value.
value
© 2007 KPMG Financial Advisory Services GmbH, österreichisches Mitgliedsunternehmen von KPMG International, einer Genossenschaft schweizerischen Rechts. Alle Rechte vorbehalten.
Printed in Austria. KPMG und das KPMG-Logo sind eingetragene Markenzeichen von KPMG International.
What does a green building promise?
In US-Numbers (here LEED)...
Higher
productivity
for tenants
Lower
OPEX/
energy
use
Better
Image …
8-9 % Decrease of operating expenses
Rents
7 5 % Increase
7,5
I
off th
the currentt market
k t value
l
6,6 % Increase of the ROI
3 5 % Increase of the occupancy rate
3,5
Yield
Value
3 % Increase of rent
Source: U.S. Green Building Council, Date: 15.04.2008
2
Integration of green attributes – three major obstacles (Or why markets failed)
Cognition
Society in general
CO2 reduction
Saving limited resources
Indirect social benefits
Physiological benefits
(improved health)
Problem
Solution
Effect
Positive/negative
external effects of a
property but no
sufficient market
value impact
Restrictions/penalties/
public grants for
negative/positive
external effects by
Government
“Limit of
System”
Recognized claimed
improvements but
limited market
impact
Transparent
communication of
(intangible) benefits
and productivity gains
“Limit of
Focus”
T
Tenant
t - intangible
i t
ibl
Wellbeing of employee
Corporate responsibility
Occupational health
and safety
y
Productivity of core business
Tenant - tangible
Occupational Costs
(rent & operative
expenses)
Other Lease Terms
Does it pay off?
and in more detail
Does “Green” pay off?
Financial figures
e.g.:
NOI, ROI, Yield
GDV, MLV etc.
“Limit of
Practise,
Evidence
and
Methods”
Methods
3
Some basic answer!
1
2
Could there be a general premium / discount rule ? NO
(due to willingness to pay)
Do we need new valuation methods? NO
(since existing tools can display everything)
3
Could there be a pan-European approach/guidance
4
Should we distinguish between developed and less
5
Do we also need to revise report
6
to these aspects? YES
(since the fundamental challenge is the same)
transparent markets? YES
(since data input is required for proper calculation)
structures accordingly? YES
(since the aspects need to be addressed in the text)
Since in principle things are not new. Are there already
valuers who handle this aspect in the right way? NO
( i
(since
some training
t i i
will
ill be
b necessary for
f everyone))
Published empirical research results on green value
Country
USA
USA
(Mc Graw,
Graw Hill
Construction 2005)
USA
USA
USA
Australia
(Mc Graw,
Graw Hill
Construction 2008)
(Miller et al. 2008,
using CoStar
Database)
(Fürst, McAllister.
2008
2008,
using CoStar
Database)
(Eichholtz et al. 2009,
using CoStar
Database)
(Bowman, Wills
(Bowman
2008)
-
-
-
-
-
-1.50%
3.00%
6.10%
-
-
3.00%
Energy
gy Star
-
-
2.80%
-
-
LEED
-
-
0.30%
-
-
Energy Star/LEED
-
-
-
11.80%
-
-
-
-
-
6.00%
-
8.00-9.00%
13.60%
-
-
-
-
-
-
-
-
-
0.25-0.50%
Improved ROI
6.60%
9.90%
-
-
-
-
Increase occupancy ratio
3.50%
6.40%
-
-
-
-
Market value
7.50%
10.90%
-
-
-
-
Selling price
-
-
-
-
16.00%
Energy Star
-
-
5.76%
10.00%
-
LEED
-
-
9.94%
31.00%
-
Energy Star/LEED
-
-
-
11.40%
-
Variable
Rental Growth for non-Green
Rent Premium for Green
Effective Rent
Decrease Operating
p
g Expenses
p
Reduction cap rate
5
Theoretical potential rent premium
Total o
occupancy
y costs
(for tenantt)
Conventional building
Recoverable operating
expenses
Rent = gross income to
owner
Highly energy-efficient
building
Recoverable operating
expenses
Reduced energy costs
Δ = max. potential rent
premium to owner
p
Rent = gross income to
owner
European research projects with focus on Green Value integration
www.immovalue.org
1
2
3
4
5
6
Inte national EU
International
EU-project
p oject „IMMOVALUE“
IMMOVALUE“ –
Integration of energy performance certificates and LCC
into property valuation practice
Austrian national project „Neue Immostandards
Immostandards” –
Integration of energy efficiency into property valuation
Swiss project“Economic Sustainability
Indicator (ESI)” – Approach for integration of sustainability
aspects within capitalisation rates (yields)
RICS Valuation Information Paper No. 13 –
Guidance for sustainability and commercial property valuation
Planned TEGoVA Guidance Notes –
Guidance for integration of sustainability aspects within
property valuation
„Ecological rent table„ for Darmstadt (Germany) of
IWU (Institut für Wohnen und Umwelt Darmstadt)
Few empirical results in Europe (hedonic pricing/multiple regression) –
IMMOVALUE research for developed
p markets
1
Offices with 532 observations
in 57 towns during 2002 - 2005
The „hard“ way: using advanced methods!
2
Question at the beginning: can a single valuer ever
3
Aim: Finding
g the p
proof for the connection between
lower energy cost and higher rents
perform this for every valution? - NO
4
Log-Log and Log-Lin model
5
Semiparametric model / P(enalized)-splines (PLS)
6
Geoadditive model / Spatial effects
8767 flats in Vienna,
Data set from 2004 - 2007
8
German data set analysis – results (simple regression)
ln(rent _ psqm) = β 0 + β 1 quality _ h + β 2 quality _ m + β 3 elev + β 4 full _ air
10
31
i =7
j =11
+ β 5 part _ air + β 6 age + ∑ β i yeari + ∑ β j city _ no j
+ β 32 ln(ngf )) + β 33 ln(maint_psqm ) + β 34 ln(energy _ psqm) + β 35 ln(other _ psqm) + u
Linear Model
Linear Model
Number of obs
F( 33, 498)
Prob > F
R‐squared
R
squared
Adj R‐squared
Root MSE
532
10.58
0.0000
0 4121
0.4121
0.3732
0.3115
logrent_psqm
_cons
cons
logngf
age
logmaint_psqm
logenergy_psqm
logother psqm
logother_psqm
year_2003
year_2004
year_2005
quality_h
qualityy_m
q
elev
full_air
part_air
Coef. Std. Err.
t
2.615
0.210 12.43
‐0.058
0.018 ‐3.19
‐0.002
0.001 ‐2.09
‐0.020
0.018 ‐1.07
‐0.095
0.035 ‐2.73
0.270
0.042 6.38
0.044
0.043 1.03
‐0.023
0.041 ‐0.57
‐0.107
0.040 ‐2.67
0.357
0.064 5.62
0.125
0.053 2.34
‐0.142
0.145 ‐0.98
0.104
0.057 1.82
0.093
0.036 2.58
P>|t|
0.000
0.002
0.038
0.285
0.007
0.000
0.304
0.569
0.008
0.000
0.019
0.326
0.069
0.010
9
Summary of hedonic approach
1
Result: 100 % increase in energy cost will shift
rental income up to 9,5 %.
2
So up front investment cost for energy saving can be
compared to rental premiums
3
There is no “One fits all marktes rule”!
4
National valuation organizations should run
regression for general guidance.
5
There must be some guidance for emerging/
less transparent markets.
6
Due to the various types of EPCs across Europe direct
integration of the label information is not possible.
10
First evidence and status quo of Austrian property valuation practice
Results of investigation per region
EPC available
income
EPC not
mentioned
EPC mentioned
(not available)
a ailable)
other income other income other
Burgenland
1
Carinthia
1
22
2
Upper Austria
4
1
Salzburg
2
3
4
1
Styria
4
3
3
8
Tyrol
11
9
8
1
21
9
20
7
12
79
27
45
29
17
1
5
Vienna
Total
1
1
2
5
9
3
1
2
1
4
3
1
74
3
1
20
4
5
EPC not
mentioned
EPC mentioned
(not available)
other income other income other
Energy aspects
mention in
calculation
EPC own
chapter
income other income other
Condominiums
1
1
65
22
35
27
14
3
1
3
Lettable flats
Commercial real
estate
0
0
0
0
2
0
1
0
0
0
0
0
14
5
8
2
2
0
0
1
1
79
27
45
29
17
3
1
Total
1
2
2
Total 182 valuation reports have been analyzed
Æ 58 % haven’t mentioned EPC at all and only
y
in 1 % of cases an EPC was available
3
Significantly low perception of EPC in the valuation
reports Æ The topic “Energy” plays a secondary role
1
Results of investigation per type of property
income
Valuation reports from www.edikte.at
(valuation dates from Jan
Jan. 09 until Sep.
Sep 09 Æ EPC
mandatory since 1.1.2009)
4
106
EPC available
1
income other income other
1
9
Lower Austria
Vorarlberg
Energy aspects
mention in
calculation
EPC own
chapter
106
74
20
4
EPC per se did not change the value
5
It was not possible to derive any experiences
concerning integration and quantification of
the EPC from the existing valuation reports
6
EPC needs more time to gain acceptance by
customers
t
and
d to
t be
b relevant
l
t for
f valuers
l
4
5
11
Interim results – European property valuation practice (IMMOVALUE-Survey)
Already observed quantitative differences between energy‐efficient and conventional properties
no (58%)
How value difference for energy‐efficient properties has been implicated
premium (21%)
5% to 10 %
1 % to 3 %
l d which type of property the value difference occured
h h
f
h
l d ff
d
Related to
O /T
One-/Two-Family-Houses
F il H
(24%)
3 % to 5 %
Market rent (30%)
Has been energy efficiency already be considered within the qualitative descriptive part of valuation
both
(7%)
discount (10%)
Difference in market value on average
Valuation parameter used to expresse quantitative value differenece
yes (42%)
n.a.
10% to 20 %
Multi Tenant -Residential
Multi-Tenant
Residential
Property (26%)
Offi (26%)
Office
remaining economic
lump-sum (14%)
lifetime (13%)
yes (48%)
Which well‐known valuation approaches are most appropriate for integration of energy efficiency
g
gy
y
10%
20%
maintenance cost
(20%)
Condominiums
(13%)
Yield (7%)
not yet, but considering (37%)
Direct Cap italisation (45%)
0%
n.a.
30%
Discounted-Cash-Flow (33%)
40%
50%
60%
70%
n.a.
OPEX
(7%)
n.a.
no (13%)
Cost Appr. (12%)
80%
90%
sales comp.
approach
100%
12
Scoring for dayly work guidance (here – impact on rents)
Significant adjustment
Key Valuation Parameter Market maturity
Market rent
Medium adjustment
- high price elasticity
Opaque (Emerging)
Market
--> Premium for
energetic building
(primarilly in emerging
market)
-…
Low adjustment
-…
-low price elasticity
- high awareness of tenants
for sustainability and energy
efficiency
ffi i
- tenants do not pay attention
on sustainability and energy
efficiency
ffi i
at allll
- om nipresence of green
building issues in the m edia
- m edia does not recognise
green buildings benefits at all
- high m arket sensitivity for
operating expenses and
energy costs (especially in
gross rent
rent-orientated
orientated property
m arkets)
- m ajority of property m arket is
not willing to pay rent prem ium
for green buildings
- good general econom ic
conditions
- suffering econom ic situation
-…
Market adjustment rate (MAR)
x
Average adjustment parameter (AAP)*
x
Valuers estimation adjustment (VEA)**
-…
-…
- building achieve green building
requirem ents
- m arket postulate green
building standards/codes
- m arket does not postulate
green buildings
- high obsolescene and
potential loss of occupier
dem and
-…
- no effect on occupier dem and
-…
+/- 75-100 %
+/- 25-50 %
+/- 50-75 %
+/- 0-25 %
x
[%] --> AAP derived from m arket evidence / valuers expectations due to replicable argum entation or estim ation
+/x
[%] --> Valuers estim ation adjustm ent due to probability of occurrence, uncertainty, etc. regarding the AAP
+/-
=
--> Weighted Adjustment Factor (WAF)
-…
- building does not achieve
energy perform ance
standards/codes
-->Discount for nonenergetic building
(mainly in further
developed markets)
neutral
=
+/-
[%] --> = MAR x AAP x VEA
II. Structure impact of
more qualitative
aspects (run the
scoring)
III. Calculate overall
market impact based
on scoring
IV. Insert calculated
maximum “Energy
gy
cost saving potential”
(ECSP)
(V. Adjustment based
on own experience)
VI. Calculate result
Key Valuation
Parameter (KVP)
x
I. Decide PREMIUM
or DISCOUNT
Valuation Parameter
Adjustment [VPA]
[€/m² p.m]
=
[€/m² p.m.]
VII. Insert market rent
VIII. Calculate result
Roadmap for IMMOVALUE
1
Current Pilot Projects and a survey which quantify the
valuers expectation concerning the overall topic is underway
2
The methodology will be reviewed by nominated
international valuation experts in the next few month
3
On the basis of the results from the expert review and
pilot projects a revised methodology will be created
4
To derive an broad acceptance and influence on future
related work – Approaches will be communicated to key
decision makers in the property valuation society
3
First results are expected in beginning of 2010 and will
be available at www.immovalue.org
IMMOVALUE Project
Contact
´
SV Dr. DDipl. Sven Bienert MRICS
Tel.
+43 512 599 96-5321
Director
Fax.
+43 512 599 96-5021
e-mail
sbienert@kpmg.at
Address
Kudlichstraße 41-43
4020 Linz
Adamgasse 23
6020 Innsbruck
Publication supported by:
15
Approach to IMMOVALUE results
German data set analysis – results (P-Splines)
ln((rent _ p
psqm
q ) = β 0 + β1q
qualityy _ h + β 2 q
qualityy _ m + β 3 elev + β 4 ffull _ air
10
31
i =7
j =11
+ β 5 part _ air + β 6 age + ∑ β i yeari + ∑ β j city _ no j
14
Effect off e
energy_psqm
14.5
15
15.5
+ f (ln(ngf )) + f (ln(maint_psqm)) + f (ln(energy _ psqm)) + f (ln(other _ psqm)) + u
0
1
2
3
energy_psqm
4
5
17

“Energising Valuation in Europe” – How does cost of

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