The effect on a property’s value is usually one of the first things to consider before a building is retrofitted with green features. For example, building owners might want to know – how much more will my office building be worth if I add a new state-of-the-art LED lighting system? What if the building has a green certification?
Essentially, green building attributes can make for a more efficient, less financially-risky building. Buildings that are considered safer investments typically sell more quickly and for higher prices than those that are not. A recent case study developed by the Institute for Market Transformation found that a commercial building in Wilmington, North Carolina, which implemented energy conservation measures, reduced nearly $11,000 in annual energy costs, increasing the building’s valuation by up to $275,000. This type of increase is not limited to energy efficiency improvements, renewables can also be factored in. According to the research, buildings in California with solar panels can be valued at a premium as high as $5,911 per kilowatt of energy capacity.
However, appraisers are often not experienced in working with green buildings. When an appraiser is not versed in investigating the costs and benefits of green strategies, they might miss some of the benefits – such as reduced operational and environmental risks as well as the potential for increased marketability.
To address this concern, the Energy Department and the Appraisal Foundation signed a Memorandum of Understanding to improve resources for appraisers who are involved with energy efficient buildings. The first of these resources, the Appraisal Practices Board (APB) Valuation Advisory #6: Valuation of Green Buildings: Background and Core Competency, was recently released by the Appraisal Foundation.
The APB Valuation Advisory provides appraisers with basic educational background on green or high-performance commercial and residential buildings. The report was developed by technical experts and industry leaders. Two upcoming resources will build on the foundation provided by this guide, which will provide methodological guidance for valuing residential and commercial buildings.
The Energy Department supported this work by providing subject matter experts and soliciting feedback from members of the Better Buildings Alliance. In addition, the Energy Department provides software tools, databases and education courses that appraisers can use to better evaluate green buildings.