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.

MIPIM 2011: Making green buildings pay

Reporting from MIPIM 2011:

Green building continues to be a hot topic. And as interest has continued even thru the economic crisis, it would appear the "trend" may be moving into the mainstream. Wednesday's session "Making Green Buildings Pay" addressed sustainability for occupiers.

Operating costs, over a building's life cycle, are approximately 80% of a building's aggregate cost. Developers cannot control interest rates or the price of energy, etc. but can impact energy consumption (running costs).

Tenants, as the drivers of space design, need to see and understand the real economic value, the cost savings, that justify green building investment and share in those benefits from investing in green buildings--one benefit being a positive public image.


Wisconsin MBA students in real estate are reporting from MIPIM. Continue to check this blog for more updates and visit MIPIMworld.

Does eco-labeling drive office occupancy rates?

Recently the Royal Institute of Chartered Surveyors (RICS) published a research paper on the effect of eco-labeling in commercial real estate. Awareness and visibility of environmental standards in building has increased, and so has pressure on and by tenants to make decisions based on environmental criteria. In the paper, the EPA's Energy Star and US Green Building Council's LEED program are analyzed for links between eco-labeling and occupancy rates in the U.S.

...there is some evidence that suggests that eco-labeled offices will have lower vacancy rates than comparable non-labeled offices."

Overall, the results suggest there is an occupancy premium of approximately 8% for LEED-labeled offices, and that this premium exists at most levels of occupancy. For Energy Star label offices, the occupancy rate premium is lower at 3%, with the effect being concentrated in offices of relatively low levels of occupation.

Eco-labeling in Commercial Real Estate Markets, RICS

What do you think? Is there a premium placed on environmentally-friendly office properties? Have you had to choose between eco-labeled office space and non-labeled, and what did you choose? Add your thoughts in the Comments below.

RICS is a prominent worldwide organization for professionals in property, land, construction and related environmental issues. With regional offices on six different continents, the organization calls for its members to "maintain and promote the usefulness of the profession for the public advantage" through providing challenging technical standards for credentialed members, offering training and continuing education opportunities, and advising organizations on best practice standards. Wisconsin Real Estate's BBA and MBA programs were granted accreditation this spring.