Value Beyond Cost Savings - Green Building Finance Consortium

Value Beyond Cost Savings: How to Underwrite Sustainable Propertiescorporate sustainability movement and related issues. The focus of this research from a realestate perspective is to understand how potential corporate space users “value”sustainability, and how important their real estate sustainability strategy is as part of theiroverall sustainability initiatives.The results from the many surveys we have reviewed, and related research, show a cleartrend of increasing focus by corporations on sustainability, with growing attention to realestate’s key role in sustainability and climate change. (See Appendix D and ResearchLibrary index codes 15.73 and 15.74).Research analyzing the real estate components of the Global Reporting Initiative or CarbonDisclosure Project, analyses of corporate social responsibility reporting, as well as generalsurveys of corporate sustainability is the type of research categorized here. Additionally,more specialized studies of how corporations value sustainability-related benefits likereduced churn cost, increased space flexibility, or improved health and productivity ofemployees also fits in this category.A key component of corporate sustainability research is not only to develop hypotheses ofthe types of space users that have a greater demand for sustainable real estate today, butalso to understand the trends in which future tenants may demand such services. Anyinvestor buying a multi-tenant building today, with leases rolling over years into the future,must be sensitive not only to today’s demand, but also to underlying changes in the marketthat could affect future demand and performance.Tenant Demographics and Market SegmentationThis category of market research covers any kind of academic research or related study thatprovides a detailed understanding of space user demand for sustainability. An example ofthis kind of survey would be demographic research, such as has been done in the hotelindustry, which assesses the demand for sustainability by potential hotel occupants basedon their age. Of course, geographic, income, and other demographic characteristics couldalso be important in defining sustainability demand, enabling more informed decisions tobe made by valuers and underwriters relative to the financial impacts of sustainability onkey financial variables like rents, occupancies, cap rates, etc.Important research that evaluates tenant market segmentation and related issues is beingconducted utilizing CoStar’s Tenant Module that enables analysis of the types of tenantsleasing, or not leasing, in sustainable properties. “Why Do Companies Rent Green? RealProperty and Corporate Social Responsibility,” was published on June 4, 2009, authored byPiet Eichholtz, Nils Kok, and John Quigley, and more work is underway by the authors.“Why Do Companies Rent Green” is an update of a similar paper from a year ago, focuseson the most critical question of every sustainable property valuation assignment—whatdrives the leasing of potential occupants of “this” building, and how important issustainability to them? By providing descriptive and statistical analysis of tenant88