Will Investors Go Green?

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Peter Belisle
President, Energy and Sustainability Services

One of the big questions about investing in energy and sustainability improvements in buildings is whether it adds to property value. Maybe that question will be answered in the next 12 months.

There weren’t very many LEED Certified existing buildings prior to 2007, when commercial real estate investment went from boom to bust. The handful of studies comparing prices of LEED buildings to the average of all sales before the downturn were mainly about new buildings, which may trade at premium prices whether or not they’re green. The past three years have not yielded enough sales overall to draw a solid statistical conclusion about investors’ perceived value of LEED. The value of an ENERGY STAR label has also been hard to benchmark, since owners of buildings with low scores don’t disclose that fact.

Now comes Jones Lang LaSalle’s 2010 Investor Sentiment Survey, which finds that 85 percent of investors plan to increase investment in commercial real estate in the next 12 months, with 30 percent of optimistic investors expecting to increase their investment by up to 30 percent and another 18 percent predicting an uptick in volumes up to 20 percent. By comparison, the 2009 survey showed 30 percent predicting a drop in investment spending by up to 30 percent.

There are many more LEED and Green Globes buildings than three years ago, and more than twice as many buildings participating in ENERGY STAR. We’re starting to see more energy retrofits. Plus, laws requiring measurement and disclosure of energy performance data at the time of sale are taking effect in several states and cities. Will green buildings will trade more quickly and at higher prices than other buildings? I think so, but a couple of years from now, we may not have to guess.

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