Green Building Certification vs. Green Features
Even if a property has a specific green building certification, the actual features can vary substantially from property to property under one certification. Most green building certifications have several compliance path routes, meaning that the project can go after a plethora of different features which combined may allow the property to reach certification. A property need not be certified to be green. A property can very well be sustainable, net-zero or efficiently constructed without having a certification.
However, the market may not realize a value to many green features without certification. Further complicating the matter is the fact that, if the feature is not properly marketed, the buyer may simply not know it’s there or why they should be interested in it. Read on for further explanation.
There are a plethora of green certifications, view some Common Green Building Certifications here.
Generally, a green feature would be an automatic or natural enhancement to the property that minimizes energy consumption, water consumption, waste, or environmental degradation.
Here is a partial list of green features:
Under floor air
High efficiency lighting
Energy Star appliances
Automatic lighting controls
Auto-dimming light balasts
Real-time energy tracking
Building automation system
Daylight harvesting features – natural or automatic
Passive solar building design
Demand controlled HVAC
High efficiency furnace
High efficiency air conditioning
Smart irrigation system
The list goes on…
Is My Property Worth More if I Install Solar Panels or other Green Features?
This is where things get complicated. The short answer: maybe. Green features are similar to other property improvements in that they:
(1) Enhance some aspect of the building; and
(2) How much that enhancement is worth is a function of your specific property, whether certain needs have already been met, the most probable buyer/tenant, property type, and property use.
From what we’ve seen, certain basic space needs must be met first before the value of a green component is recognized. Basic budget, location, livability/useability, functionality, condition, and durability needs should be satisfied to the extent necessary for the end-user, prior to most green features or certifications adding value. For example, though not always the case, if a home lacked a functional floor plan but had solar panels, it is likely that a buyer would not be willing to pay an additional amount for the home because although it has solar, the basic functionality need has not been met. Income producing properties present a slightly different scenario due to the fact that value is more heavily weighted to income and expenses. Thus, some of the previous residential buyer needs may come into play less if the green feature is reducing operating costs, increasing rental rates, etc. It is important to select an appraiser with experience valuing green properties because the analysis can get very complicated.
Is My Building or House Worth More with Certification?
Green certification is one aspect of a property. For example, consider you are buying a used car. A used car that is “certified” by an auto-dealer as “certified-used” is still a particular color, make, model and age, at a particular price point. That is, the primary features of the car are still in-tact with or without certification. If the car is also “certified-used” by some entity, you may perceive the car as having passed certain quality control measures, performance tests, maintenance tests, etc. Green building certifications are similar in that they provide a real or perceived third party warranty that the building has met certain design requirements, performance metrics (depending on certification type) or other quality standards. Without the certification, there are still characteristics of the property that relate to certain buyer demands. How the market views this characteristic will depend on your specific property, local market, property type, and use.
Commercial green buildings can have several quantifiable benefits within their market, such as:
Lower cap rates
Lower operating expenses
Lower maintenance expenses
Lower employee turnover
Higher rental rates
Higher stabilized occupancy
Does this mean that every green building has all of these attributes? No. However, they are components that should be considered and explored when appraising a green property. Several case studies have been completed that support these considerations, though generalizations such as these do not necessarily reflect all individual cases. Minor differences in any of these categories can have substantial implications for the value of the building. For some market studies and/or other resources view our Green Building Appraisal Resources page.
Residential green buildings can also have quantifiable benefits within their market, such as:
Fewer days on market
Huge PR capabilities – free advertising
Lower maintenance expenses
Lower utility costs
Additional property enhancing features
Increased curb appeal
Do all green residential properties have these benefits? Probably not. However, they are components that should be considered and explored when appraising a green property. For some market studies and/or other resources view our Green Building Appraisal Resources page.