Do Sustainability Attributes Influence the Valuation of German Office Buildings

The interest in sustainable and energy efficient buildings has been increased over the last years due to global changes with regard to ecological, economic, political and social issues. Nevertheless, awareness regarding the effect of sustainability issues on property value on the German real estate market is still limited. Against this background, the effects of currently emerging long-term developments such as global climate change, ageing society or rising energy prices are not or only insufficiently taken into account in common property valuation methods employed today, even though they can significantly affect the long-term value of a property. However, recent research findings underlined sustainable properties that can handle long-term changes of exogenous framework conditions will be marketable in the future and maintain their value as well. Therefore, the aim of this study is set to identify and operationalize value-related sustainability attributes of a property. On the occasion of different national standards, restrictions, market behaviors and employed methodologies, the object of investigation is narrowed to the valuation of German office buildings with the German income capitalization approach and the discounted cash flow method. In this context, various relevant scenarios are identified and analyzed. Subsequent, the value-related sustainability attributes of a property are derived from qualitative long-term changes in ecological, economic, political and social framework conditions with a clear direction which allow forecasts of the effect on the value of property: It can be assumed that these changes can result in different requirements for properties and, account on this, effect the property value. Furthermore, they will give evidence of the risk of a property depreciating value or the opportunity of gaining value due to these developments. By the means of this study, sustainability issues which are either not or only insufficiently taken into account, can be thus regarded and integrated into the assessment that results in more transparent evaluations.