Thomas Lützkendorf

Sustainable property investment: valuing sustainable buildings through property performance assessment

How can the property and construction industry meet the current and forthcoming challenges posed by sustainable development? The perception of property as a commodity is changing to emphasize building characteristics and performance as major determinants of a propertys worth and market value, thereby requiring new ways of assessing worth and value. Commercial property valuation represents a major mechanism that could allow environmental and social considerations to be more closely aligned with economic return. In particular, the rationale and initial considerations are explored for the incorporation of environmental and social issues into valuation theory and practice. A system that allows for the description, measurement and assessment of various aspects of building performance is conceptualized. Possible sustainability key performance indicators are identified and the basic principles for assessing performance along the life cycle of buildings are explained. It is argued that the environmental and building research community has a central role in determining a standardization of terminology and improving the exchange of ideas between financial and environmental research disciplines. Then, the simultaneous consideration of economic, environmental and social issues can provide a more profound knowledge about property characteristics and associated performance. This will create a more robust assessment approach and lead to greater reliability of assessment results. Finally, the opportunities afforded by the synergies between sustainable design and risk management are identified and implications for property risk assessment for lending and insurance purposes are highlighted.

Alleviating asymmetric information in property markets: building performance and product quality as signals for consumers

As housing and commercial property markets shift from predominantly supply-push to demand-pull in some parts of Western Europe, consumers will place greater value on information regarding a buildings degree of quality and performance. However, information asymmetries in present markets indicate the supply side fails to meet the building information needs of the demand side about the quality, performance and service provided by a facility. Therefore, when property is traded, the demand sides willingness to pay for value decreases and the initial price becomes the decisive factor. The question is raised whether the quality or the performance approach might stimulate the market to provide sufficient building information to counter asymmetric information. It is argued that both concepts are moving towards one another, that they are complementary and that they can form the basis of an interchanging communication medium. A comprehensive building information system is proposed that serves as a knowledge basis from which certain building information can be extracted depending on the type of enquiry. An array of indicators and criteria is categorized to allocate/match information on buildings to the parties involved. It is argued that creating an effective information exchange between market participants leads to a ‘win–win’ situation for the demand and supply sides in particular and for the whole construction and property industry in general. The details of this paper are related to housing property markets. thorsten.speer@wiwi.uni-karlsruhe.de E-mail: thomas.luetzkendorf@wiwi.uni-karlsruhe.deAs housing and commercial property markets shift from predominantly supply-push to demand-pull in some parts of Western Europe, consumers will place greater value on information regarding a buildings degree of quality and performance. However, information asymmetries in present markets indicate the supply side fails to meet the building information needs of the demand side about the quality, performance and service provided by a facility. Therefore, when property is traded, the demand sides willingness to pay for value decreases and the initial price becomes the decisive factor. The question is raised whether the quality or the performance approach might stimulate the market to provide sufficient building information to counter asymmetric information. It is argued that both concepts are moving towards one another, that they are complementary and that they can form the basis of an interchanging communication medium. A comprehensive building information system is proposed that serves as a knowledge basis ...

Addressing risk and uncertainty in property valuations: A viewpoint from Germany

Purpose – The purpose of this paper is to propose and discuss practical approaches on how to address risk and uncertainty within valuation reports, particularly when there is only insufficient comparable transaction evidence available.Design/methodology/approach – A four stage approach to property valuation is proposed that can be particularly useful if there is insufficient comparable transaction evidence available: Identifying, measuring and expressing risk by making use of property rating approaches. Transforming risk into risk premia for calculating the yield on a risk free basis by partially making use of models of risk and return usually applied in finance. Simulating risk premia (since there is great deal of uncertainty involved in determining these premia) by making use of a statistical method commonly referred to as Monte Carlo Simulation. Using the derived yields probability distribution in combination with further probability distributions for other valuation input variables (e.g. market rent)...

Net-zero buildings: incorporating embodied impacts

The design and assessment of net-zero buildings commonly focus exclusively on the operational phase, ignoring the embodied environmental impacts over the building life cycle. An analysis is presented on the consequences of integrating embodied impacts into the assessment of the environmental advantageousness of net-zero concepts. Fundamental issues needing consideration in the design process – based on the evaluation of primary energy use and related greenhouse gas emissions – are examined by comparing three net-zero building design and assessment cases: (1) no embodied impacts included, net balance limited to the operation stage only; (2) embodied impacts included but evaluated separately from the operation stage; and (3) embodied impacts included with the operation stage in a life cycle approach. A review of recent developments in research, standardization activities and design practice and the presentation of a case study of a residential building in Norway highlight the critical importance of performance indicator definitions and system boundaries. A practical checklist is presented to guide the process of incorporating embodied impacts across the building life cycle phases in net-zero design. Its implications are considered on overall environmental impact assessment of buildings. Research and development challenges, as well as recommendations for designers and other stakeholders, are identified.

Exploring the relationship between the sustainability of construction and market value: Theoretical basics and initial empirical results from the residential property sector

Purpose – The basic purpose of this paper is to explore the relationship between the sustainability of construction on the one hand and market value, worth and property investment performance on the other hand. This paper aims to analyse price movements and price differences caused by different property characteristics.Design/methodology/approach – Based on the estimated log‐linear hedonic regression model, a hedonic price index is calculated. Price movements subject to different property characteristics are examined by constructing various conditional hedonic price indexes.Findings – The results reveal that, high‐quality flats or flats within preferred locations clearly outperform their competitors in terms of price stability during an overall market downturn. However, it is also shown that contemporary building descriptions or specifications of transactions within property databases are not yet sufficient and need to be widened to meet forthcoming challenges. Therefore, an “integrated building performan...

New trends in sustainability assessment systems – based on top-down approach and stakeholders needs

Worldwide interest in future-proof buildings is growing, leading to increased demand for suitable methods and systems for assessing and communicating the sustainability of buildings. The number of stakeholders interested in sustainability assessment results as a basis for decision-making is growing. Ultimately, in order to bring about greater sustainability, stakeholders need to understand their potential impacts, but can only do so if this potential is clearly communicated to them through the system structure and through a language and in a format that suits their needs. Numerous systems exist, though these do not always meet the above requirements, do not always address all aspects of sustainability, may have certain methodological issues and may cause confusion through their sheer number. Therefore, there is a clear need for assessment systems to be developed further. This paper proposes that the issues raised can be tackled by a two-pronged approach: Firstly, by adhering to a top-down approach the str...

Sustainable construction in Central/Eastern Europe: implications from SB04 in Warsaw

The outcomes and implications from the regional Central and Eastern European Conference on Sustainable Building (SB04) are considered in conjunction with the current state of sustainable construction within Central/Eastern European countries. Central/Eastern European countries are coping with shifting and reorganizing economic, political and legal systems within the wider framework set by the European Union, which are now shaping the course of future development. At the same time, the whole region is under intense development for various reasons (e.g. international investors increasingly recognize the attractiveness and opportunities of the regions commercial property markets and a huge backlog demand for new housing facilities leads to intense construction activity within the housing sector). It is argued that, on the one hand, significant opportunities exist for implementing the principles of sustainable development in the property and construction sector. However, on the other hand, needs-driven construction activity might focus on quantitative delivery without taking into account sustainability issues as well as the long-term consequences of construction projects. This can lead to aberrations that are very difficult to remediate. Appropriate actions and future strategies (developed within the scope of SB04) are identified to help promote and foster sustainable development within the Central/Eastern European region. A multifaceted approach to sustainable construction is required for use by policy-makers, practitioners and civil society. The description and assessment of interactions between different aspects of sustainable development in property in construction is the prime research priority (for both, the older Western European countries and the new Central and Eastern European Member States).

Reflecting sustainability in property valuation – a progress report

Purpose The purpose of this paper is to report on the findings of a survey conducted by the Royal Institution of Chartered Surveyors (RICS) to discuss the extent to which qualified valuers have adapted their valuation practices in the light of guidance published by RICS in respect of sustainability and commercial property. The findings are placed within a wider debate between assessment of market value and investment value (worth). Design/methodology/approach The paper is a theoretical discussion incorporating the results from an empirical survey of valuation practitioners. Findings The paper reveals that guidance published by RICS in 2011 has achieved limited, but variable, impact in terms of impacting on valuation practice due to a combination of factors including lack of knowledge of the guidance, non-requirement of clients to request sustainability reporting within valuations, paucity of data. It found that where worth (investment value) is required, sustainability factors are more likely to impact the calculation than where an estimate of market value is prepared. The paper identifies theoretical problems and practical barriers hindering an integration of sustainability aspects into valuation practice. Research limitations/implications The empirical work was conducted prior to the embedding of guidance within the mandatory provisions of the “Red Book”; the study therefore reports on a direction of travel rather than the current position. The implications for research are the requirement to enhance data capture and to seek ways to break down the barriers to more comprehensive integration of such data so that worth and market values may begin to converge. Practical implications The paper has practical implications for both the education of valuers which is proposed through the RenoValue project discussed in the paper and for the RICS in monitoring progress towards more specific integration within valuers’ calculations. Further, the paper identifies that clients and lenders have a key role to play through the instructions given to valuers. Social implications There is now widespread recognition that properties which are not resource efficient and which are not equipped to flex to changing occupier needs may not currently be “future proofed” in investment value terms and are likely to see value erosion over time. Further, buildings have a key role in terms of climate change policy. Whilst new buildings can be mandated to meet improved efficiency standards, the ways in which buildings owners can be encouraged to upgrade will be important moving forward. One way is through a value chain response. Originality/value The survey is the most comprehensive investigation of valuer’s practice in relation to sustainability and the assessment of market value and worth undertaken. This provides a unique insight into the effectiveness of professional guidance and enables an informed discussion as to appropriate ways to enhance guidance moving forward.

Erratum to: Cumulative energy demand in LCA: the energy harvested approach

Correction Due to a misinterpretation of an information source, the characterisation factor of geothermal energy within the approach ‘CED energy statistics approach’ was wrongly reported and applied. This affected the case study results using this approach. In this paper, the correct tables and figures are displayed. The characterisation factor of geothermal energy in the approach ‘CED energy statistics’ is 1.0, and not 7.0 (see Table 3). The cumulative energy demand, renewable of the residential building Rautistrasse according to the ‘CED energy statistics’ approach, is 76 MJ wood-eq./ma, and the total cumulative energy demand is 421 MJ oil-eq./ ma (see Table 6). Over the whole life cycle of the building, the use phase causes 70 % of the cumulative energy demand according to the approach ‘CED energy statistics’ (Table 7), followed by the manufacturing and construction phase (17 %), the replacement (11 %) and the end of life stage (1 %).

National Integrated Assessment Modelling zur Bewertung umweltpolitischer Instrumente : Entwicklung des otello-Modellsystems und dessen Anwendung auf die Bundesrepublik Deutschland

Auf internationaler Ebene wurden Ziele zur Minderung von Luftschadstoff- und klimarelevanten Emissionen vereinbart, deren Umsetzung den jeweiligen Unterzeichnerstaaten obliegt. Hierzu existieren zahlreiche umweltpolitische Instrumente, deren Effektivitat und Effizienz jedoch schwer abschatzbar sind. Daher ist es das Anliegen des im vorliegenden Buch beschriebenen otello-Modellsystems, solche politischen Instrumente in ihren okologischen und okonomischen Wirkungsmechanismen zu bewerten.