Eco-friendly Commercial Properties Better Retained Their Prices During Pandemic

SINGAPORE – An analysis by the Institute of Real Estate and Urban Studies (IREUS) of the National University of Singapore (NUS) discovered that green commercial buildings outperformed properties without eco-friendly certification, reported The Business Times on Wednesday afternoon (20 April, SGT).

While the difference between green office buildings and their non-green certified counterparts is marginal, there was a significant difference for some asset types.

For instance, prices of eco-friendly business parks increased by 2.8 percent, but that for non-green certified business parks slid 0.4 percent during the virus outbreak.

“On the whole, the values of commercial buildings with green certification seem more resilient during the pandemic. Given the uncertainty arising from geopolitical tensions and rising energy costs, these buildings are anticipated to do better than their counterparts that are not green-certified, as their energy savings will be higher,” said the institute’s Deputy Director Lee Nai Jia.

Notably, IREUS compared the changes in the prices of properties owned by Singapore-listed real estate investment trusts (S-REITs) across different property types and countries between fiscal years 2019 and 2020. The analysis made use of data extracted from S-REITs’ annual reports, but it excluded recently-acquired properties that did not have prior valuations for comparison.

One of the earliest researches on the price difference of environmentally sustainable properties was a paper published in 2010 entitled “Doing well by doing good? Green office buildings” by the American Economic Association. The study showed that the rents and capital values of US office buildings with an eco-friendly certification are respectively 7 percent and 16 percent higher than typical office towers.

Furthermore, a survey published by Jones Lang LaSalle (JLL) in June 2021 found out that 70 percent of companies in Asia Pacific were willing to pay higher office rents to occupy green-certified office buildings. Also, the majority of corporate tenants leasing workspace in a green building are currently paying 7 percent to 10 percent more office rent.