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Hedge your risk against value erosion with Green-buildings
With the ever growing emphasis on sustainability, green investments will become a focus point over the next decade as a means to avoid value erosion.
It is clear that green investments are the best way forward.
Otherwise, occupiers who look to chase costs through lower rental values will be hit by higher operational costs of non-sustainable buildings.
Sustainable buildings are well on the way to becoming the benchmark of quality buildings – and this line of thought will be followed by the economics of rents, yields and valuation. It can’t be denied that current economic conditions are far from favourable and will probably cause a delay in green investments, however, the industry must continue to drive change to remain at the forefront of the game.
After all, by 2020 sustainability variables such as carbon emissions taxes and rising insurance premiums will become reflected in valuations. There is no running away from the fact that more informed occupiers will become better educated about their sustainability requirements and will ensure that their needs are addressed.
The time has come and it is clear, no pain, no gain.
Weak economic growth forecasts mean that occupiers retain a focus on cost control. Many occupiers are using the conservative economic environment as an opportunity to re-gear leases rather than move to new accommodation.
As well as long term re-gearing, we are also seeing a trend for restructuring for shorter renewal periods i.e. three/ five years.
Longer term re-gears can also offer major opportunities for occupiers and landlords. But it is important to note that these deals have to work financially for both parties as some occupiers think that every landlord is distressed – which isn’t the case. Landlords generally need to see a capital enhancement and are usually prepared to share this with the tenant.
Upside benefits for occupiers include:
• egotiating break clauses and extending lease terms to gain rental holidays or capital payments,
• Altering lease language to build in flexibility to sub-let or assign,
• Contributions towards refurbishment works,
• Caps on service charge,
• emoval or the reinstatement of dilapidations liabilities.
• Avoidance of cap ex and moving upheaval
Q. What is a Greenbuilding?
A. There is no strict definition for what makes a home green.
The United States Green Building Council (USGBC) has a simple, definition of a Green home :
"A green home uses less energy, water, and natural resourcess creates less waste; and is healthier for the people living inside."
Q. Why consider Green-building?
A.It creates less reliance on Municipal Services and is an attractive investment.
They Provide a better hedge against inflation than conventional buildings.
People enjoy being percieved as healthy and environmentally conscious.
It saves money (After a payback period)
Q 4. What criteria is used to determine the Green Effeciency of a Building?
Q 4. Greenbuildings are rated according to different shades. The most obvious are Solar geysers, Rainwater tanks, Shading and Gas stoves.
However any innovation that demonstrates a reduction in carbon footprint may fit the criteria.
Pics of Rubber retaining walls and Solar lights.
Q 6. What energy effecient standards should be used.
A 6. SANS 204 calls for shading on the windows and innovative approaches to the building envelope design.
The image (below) shows a step in the shading design process, in this case too much shading has been added on the north windows and not enough on the remaining windows.
Compliance with SANS204 will not necessarily produce a green building – but it will produce an energy efficient building by any standard.