Wednesday, March 7, 2012

Reporting from MIPIM: What happens to "brown" properties in a "green" world?

Reporting from MIPIM 2012:

Have we truly turned a corner on sustainable building practices, no longer focused on whether or not it's feasible to embrace these new techniques but shifting instead to the challenges faced by the structures that don't (or can't) go "green"?

It appears that the question of whether sustainable building is a positive net present value investment has been answered and the industry has now turned to the difficult task of large scale implementation. That was the conclusion of this morning's session at MIPIM "Sustainable Property Investment: Does Good Mean Good Value?"

Sustainable buildings have been proven to outperform conventional buildings in a variety of value metrics. Demand is building for standardized data collection and the creation of a "green" index. This would allow for greater transparency regarding green benefits and allow buyers and sellers to make more informed decisions. Although state governments and market observers have sought to gather data about the performance of sustainable buildings, finding a way to share this data has proved to be quite difficult. The ability to provide accurate and applicable data regarding green buildings is the greatest challenge that the field faces in the near future.

The next phase of the transition to sustainability is the functional obsolescence that will accumulate to non-green buildings in the future. These so-called 'brown discounts' were estimated to be substantial and will only grow. Conventional buildings will lose their competitive position and owners of these properties should anticipate major re-positioning or decreases in value. There is no timeline or magnitude of brown discounts yet, but this prospect is certainly one of the most troubling threats (or is it an opportunity?) in real estate today.

For more coverage of discussions and developments at MIPIM, check our blog and visit the official MIPIM blog.

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