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Unlocking Real-Estate Value by Going Green

Unlocking Real-Estate Value by Going Green

                                                            Via Morgan Stanley’s INSTITUTE FOR SUSTAINABLE INVESTING.

Did you know that new green technology could boost asset values of US office buildings by as much as $35 billion. I’m curious as to what the projection would be for the Canadian market, but I’m sure it’s significant. According to their recent report, sustainable technologies can cut a buildings annual expenses anywhere from 3 – 30%.

“These savings can potentially add $3.5 billion-$34.9 billion2  of asset value in the 10 largest US commercial real-estate markets. The report details the yearly utility savings in each of those 10 US cities, which can range from $32 million in Philadelphia to $239 million in New York. That potentially adds $489 million to $4.8 billion of asset value.”   -Institue for Sustainable Investing

Take this example provided by the Institute:

“Potential Savings in Five Major Cost Areas From Sustainable Building Management Practices for a Theoretical 250,000 Square-Foot Building in San Francisco”

Cost Before Retrofit
Savings
$40,658
Cost After Retrofit
$30,492

WASTE
25%
Cost Before Retrofit
Savings
$658,818
Cost After Retrofit
$533,642

REPAIR
18%

ELECTRICITY
16%
Cost Before Retrofit
Savings
$567,697
Cost After Retrofit
$510,927

OTHER UTILITIES
9%
Cost Before Retrofit
Savings
$129,499
Cost After Retrofit
$116,549

INSURANCE
4%
Cost Before Retrofit
Savings
$159,157
Cost After Retrofit
$151,199
Improved Occupancy Rates
+2%
Rent Premium
$279,707 (+3%)
Improved Net Operating Income
$777,559 ($3.11 per sq ft)
Added Asset Value3
$14.1 million ($56.55 per sq ft)

1 “Green Retrofitting Costs and Benefits: A New Research Agenda”, National University of Singapore and Institute of Real Estate Studies, 2011; accessed on 1/26/2016).

2 Calculated by the Morgan Stanley Real Estate Investing Team (MSREI) using BOMA Experience Exchange Reports, CBRE market inventory data, and Real Capital Analytics market valuations.

3 Calculated by the MSREI team using BOMA Experience Exchange Reports.

Check out the Morgan Stanley Institute For Sustainable Investing Report – Bricks, Mortar and Carbon

Bonnie Meisels
[email protected]
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