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Property management team identifies high-performance and innovative resources as key determinant in assets’ appraisal value
CHICAGO, Aug. 1, 2012 – As commercial real estate owners and managers seek and execute innovative solutions to enhance properties’ sustainability, such as retrofits, they must also determine ways to measure how these initiatives impact the value of assets to ensure accurate appraisals.
“We’re constantly striving to add real value to the properties we manage,” said Dan Pufunt, President of Property Management for Jones Lang LaSalle. “Because we are so closely tied to these buildings, it is our responsibility to act as an advocate and knowledge expert on all upgrades that have been or are being completed on behalf of their owners.”
The global market demand for energy-efficiency retrofits is expected to nearly double from $80.3 billion in 2011 to $151.8 billion by 2020, according to a recent Pike Research report. And while the plethora of data associated with projected cost savings from retrofits will drive this spike, it’s challenging to prove the value- add to a property.
“One of the challenges facing the market is how to accurately discern the direct impact of sustainability and other factors on property value because so many moving parts exist,” said Christopher Wilson, Global Sustainability Officer for LaSalle Investment Management, the investment arm of Jones Lang LaSalle. “But, because valuation is a significant asset driver, it’s critical to understand the impact of sustainability and efficiency.”
Analyzing sustainability’s influence on commercial property value requires more than anticipating potential reduced expenses; it also necessitates measuring vacancy, risk, and income, according to an appraisal advisor at a financial institution affiliated with Jones Lang LaSalle.
“High performance is not solely about energy savings,” said the advisor. “The decreased vacancy rates and rent lag time typically associated with such buildings, and the reduced risk because of their higher quality and stronger tenant base, are just as important. Decreased energy bills are not the only benefit of high performance buildings.”
Despite challenges, creative solutions exist to measure value and the impact of sustainability for clients – solutions that continue improving as energy efficiency proves increasingly important for owners. For example, LaSalle Investment Management uses its financial modelling software to track building financial performance as a means to demonstrate the impact of energy reductions on property valuations.
Wilson said that by uploading a client’s $500 million office portfolio into the software, and inputting an achievable 10-percent-reduction in energy consumption without capital investment, the software’s analysis is able to demonstrate a $2.5 million increase to bottom line portfolio value as a direct result of energy reductions.
“We want to be among the leadership set that isn’t just talking about sustainability, but actually proving its worth by measuring and tracking the results, as well as benchmarking performance over time,” said Bob Best, Executive Vice President of Chicago operations and Product Lead for Jones Lang LaSalle’s Energy and Sustainability Solutions Group in the Americas.
Measuring, analyzing and advising on strategies for energy-efficiency prove critical components to enhancing property values. Furthermore, value-driven data must be streamlined and clear so that it can be accurately reflected in property values.
“If you have a high performance building and you’re not providing effective data on the money you’re saving, expect very little impact,” explained the national bank’s appraisal manager. “If appraisers aren’t handed the most effective valuation data from the beginning, their methods are skewed and so are their final results and recommendations.”
Not only is it important to offer data prior to an appraisal, but property managers with intimate knowledge of the building and its performance should be on hand during the appraisal to point out specific improvements and their impact. Jones Lang LaSalle has taken this a step further by increasing its number of LEED-certified professionals. The firm already has more than 1,000 accredited professionals, including property managers, and is striving to gain more than 400 accredited employees by year’s end.
“Having LEED accredited property managers shows our commitment to sustainability and the firm’s clients,” “By understanding energy efficiency at the highest level, our managers can optimize building performance to the highest level. In addition to implementing energy-saving initiatives that add value, we are able to explain those initiatives to appraisers to further add value.”
Of equal importance, suggests the advisor, is sourcing a knowledgeable appraiser who understands the impact of LEED certification on buildings, which are measured against U.S. Green Building Council standards and oftentimes more complex and high-performing in terms of offerings.
You can learn more about the sustainability savings, performance and innovative research by visiting Jones Lang LaSalle’s Property Management website.
For more news, videos and research resources on Jones Lang LaSalle, please visit Jones Lang LaSalle’s U.S. Media Center web page.
About Jones Lang LaSalleJones Lang LaSalle (NYSE:JLL) is a financial and professional services firm specializing in real estate. The firm offers integrated services delivered by expert teams worldwide to clients seeking increased value by owning, occupying or investing in real estate. With 2011 global revenue of $3.6 billion, Jones Lang LaSalle serves clients in 70 countries from more than 1,000 locations worldwide, including 200 corporate offices. The firm is an industry leader in property and corporate facility management services, with a portfolio of approximately 2.1 billion square feet worldwide. LaSalle Investment Management, the company’s investment management business, is one of the world’s largest and most diverse in real estate with $47 billion of assets under management. For further information, please visit www.joneslanglasalle.com.
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