Lawrence Berkeley National Laboratory
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:
- Author(s): Mills, Evan
- et al.
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.1 Varia/ons in the level of 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.