Looking For Value in All The Wrong Places. Toward Expanded Consideration of Green and High Performance Attributes in Non-residential Property Appraisals in the United States

Abstract

Large numbers of commercial buildings have sought to improve their energy and environmental performance, with half of all leasable U.S. offices now designated at some level of "green". All proper/es fall somewhere on the green/high--performance spectrum (above and below average) whether or not they bear a formal label or ra/ng. Varia/ons in the level of 1 performance can either posi/vely or nega/vely influence value. This component of value can be shaped by many factors, from u/lity costs to tenant/owner preferences that translate into income (rent levels, vacancy rates, lease--up /mes, etc.). Occupant percep/ons of indoor environmental quality are another poten/al influence on value.While there has been liYle uptake of this thinking by prac/cing appraisers, the increased prevalence of green/HP prac/ces combined with concerns about appraiser competency are compelling the industry to adapt their tradi/onal techniques to this new driver of value. However, the overly narrow focus of policymakers on appraisal of labeled or rated exemplary buildings (e.g., LEED or ENERGY STAR Cer/fied) represents a significant missed opportunity. Any level of green or energy performance can in fact influence value, including below--average performance (a.k.a. "brown discount"), irrespec/ve of whether or not the building has been formally rated. Another surmountable challenge is the limita/ons to non--appraisers' understanding of the appraisal process (and constraints therein). A crucial byproduct of this is unrealis/c expecta/ons of what appraisers can and will do in the marketplace.This report iden/fies opportuni/es for catalyzing improvement of the green/HP appraisal process, which apply to all involved actors-from owner, report--ordering client, the appraiser, and the appraisal reviewer-and fostering more demand for appraisals that recognize green/HP property aYributes. The intended audience is primarily the public policy community and other stakeholders outside the formal appraisal community who can contribute to the broader effort to advance professional prac/ces. The discussion begins with a descrip/on of the appraisal process and the points at which green/HP considera/ons can enter the analysis. A series of major barriers to beYer prac/ces are iden/fied along with approaches to reducing them. Barriers• Although industry standards of prac/ce cau/on against bias of any sort, a skep/cal predisposi/on towards "green" is reinforced by informa/on deficiencies.• Informa/on deficiencies result from the lack or difficulty of obtaining usable data on green/ HP features in subject proper/es as well as valid sales comparisons or cashflow analyses.• Competency deficiencies, such as lack of conversancy in relevant technical topics, leads to oversights, and disjointed treatment of relevant informa/on. This report adopts the terminology used by The Appraisal Founda/on and others. "Green" refers to the en/re 1 panoply of green building strategies, including sustainable materials, improved indoor environmental quality, site--sensi/ve ci/ng, wat...

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