Sustainable Property the Measurement and Valuation Challenge

There is a recognised misalignment by industry stakeholders that the financial benefits of sustainable property investment are inherently difficult to quantify (RICS, 2008). The lack of key financial correlations between sustainability and economic returns with regards to property investment has created major challenges for valuers who seek to accurately reflect the impact of sustainability in property valuation. Clearly if the implementation of sustainability in buildings is to develop further in the property market then it is essential that the links between market value and sustainability are identified. The lack of financial drivers are preventing significant investment in sustainability because stakeholders have limited ability to measure the level of sustainability in a building or understand the impact upon the value. The absence of detailed recent market evidence, sales data and lease transactions of sustainable buildings means there is no reliable evidence as to whether sustainable buildings are feasible (Lutzkendorf and Lorenz 2005). In addition, there is confusion in the industry surrounding the measurement of the level of sustainability in commercial property. Although a range of environmental rating tools exist for buildings in Australia and New Zealand commercial property, the synergy between these tools and identification of the relationship between the measurement and market value is somewhat blurred. This is due to the unique approach behind the compilation of points attributed in the rating tools for sustainability in commercial property. This paper presents findings from the lead authorís doctorate investigating the relationship between the elements of sustainability and the impact upon the market value of commercial property. The paper provides a useful insight into the rapidly evolving area of the valuation of sustainability in commercial property, with the emphasis placed on the knowledge and understanding of Valuers about the impact of sustainability upon property value.