The Leader - July/August 2008 - (Page 45)

eM ea ’s B u Ild I Ng e Ne rg y ratI Ng : re ady to take sto ck? some just want to meet regulation, others, for example PRUPIM and Hermes in the UK, are leading the way. In their 2007 annual RPI report Hermes states: “By identifying those properties with less efficient characteristics now, we are able to prioritize improvement works to be carried out before the [EPBD] legislation comes into force, thus giving us the best possible advantage in selling and leasing high quality buildings to high quality occupiers.” The factors driving the interest and awareness of the various stakeholder groups are closely linked to the perception of demand. Investors and developers see the need to create energy-efficient buildings as driven by tenant-occupiers, coupled with developers’ perception that creating such buildings offers the potential to increase the liquidity of their property portfolios. For tenant-occupiers, the main incentives are the opportunity to reduce running costs and improve their brand image, their image as good corporate citizens, or both. What caN the INdustry do? the final price paid by the purchaser/lessor. We therefore strongly recommend that all owners of office property in the EU carry out an audit of their commercial property portfolios. Ongoing, strategic decisions will need to be made about the balance of the portfolio – should buildings with low ratings be avoided, or purchased and viewed as an “up-labeling” opportunity? Ultimately the BER legislation will require specific skills and have a dual impact on the technical expertise and manpower resources necessary to secure building energy ratings on properties, coupled with the technical expertise and manpower resources needed to reevaluate property portfolios and their potential for increased depreciation, marketability and, ultimately, liquidity. The process of determining the likely value of a property portfolio post-BER implementation will also require higher levels of knowledge, benchmarking and metrics. Investors/owner-occupier will have to either generate this data in-house or with the help of their asset management service providers. sceNarIos aNd IMplIcatIoNs We estimate that approximately 2 billion sq. ft. (195 million sq. m.) of office space across Europe is more than five years old. The physical status of most of these office buildings will have to be reviewed at some point, especially following the implementation of the BER regulations. In addition, it will be essential to carry out a review of office buildings as they come up for sale or lease because an energy efficiency certificate will be legally required as part of the due diligence process. The status of that certificate will have the potential to impact either positively or negatively on The implementation of BER through the EPBD is a fact and should not be ignored by property users and owners without full consideration of the potential risks. Existing Office Stock. We have identified a number of possible positions that investors and owner-occupiers can adopt, ranging from a “do nothing” approach to refurbishing entire portfolios. The ultimate path followed or chosen will most likely depend on attitudes to sustainability issues, financial strength and the size and activity levels of respective property portfolios. New Office Stock. There is 103 million sq. ft. (9.6 million sq. m.) of office space currently under construction across Europe. All new stock will be affected by EPBD regulations and therefore a series of immediate actions are required for developers and owners of this property category. Without appropriate metrics in place developers will be less able to measure, price and potentially improve their BER. Ultimately this may result in buildings receiving a poor rating and being less marketable. Cross-Border Investment. Companies with cross-border operations must be aware of the progress in relation to, or the application of, the Directive in each EU member state. While in theory the Directive should be applied equally across all member states, Jones Lang LaSalle’s research indicates that progress in relation to implementation differs greatly across the EU2. Different approaches may also potentially be compounded by differences in the approach to the measurement of energy efficiency. This is a potential risk for all firms actively involved in cross-border investment. To minimize this risk we urge that cross-border investors arm themselves with as much information as possible about the BER system (methodology and progress) in force in each country targeted for investment. Value Differential. If time shows that the BER system will create a value difference between properties with low and high energy efficiency ratings there is the very real likelihood that a two-tier commercial property market will be created. This gives the well prepared investor the opportunity to prioritize their portfolios and actively promote highrated property. the le ade r 45 J u ly / a u g u s t

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The Leader - July/August 2008 Leadership Contents Message from the CEO Real Estate in the News Organizational Design Accommodating Growth Responding to the Challenge EMEA's Building Energy Rating TVA's Shortcut to Success ANZ Banking Group’s Jane Hamilton Tractus Asia’s Dennis Messeroll Arizona’s Greg Weiner Workplace Design Workplace Directory The Texas Report Industry Tracker Discovery Forum Findings Career Development Congratulations to 2008 Corenet Global Award Winners! Young Leader Economic Development in the News Connect with Corenet Global A Look Ahead

The Leader - July/August 2008

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