Financial Performance of High-Performance Buildings

The U.S. Department of Energy (DOE) recently partnered with the Lawrence Berkeley National Laboratory (LBNL) and Real Estate Research Institute (RERI) to catalyze research around the financial performance of high-performing, energy-efficient buildings to develop insights that influence commercial real estate practitioners and drive further investment in energy efficiency. By 2040, it’s expected the commercial real estate sector will consume 27% of all energy in the U.S. While there is a growing interest and increase in certified green and energy-efficient buildings, they still don't represent a significant portion of the commercial real estate sector. DOE recently commissioned a literature review of peer-reviewed and published academic papers pertaining to green or energy-related building attributes and financial performance. The four papers featured here describe insights and next steps for transforming green building investment practices in the commercial real estate industry.

FINANCIAL PERFORMANCE RESEARCH PAPERS

Paper quantifying the impact of green building certifications and projects on building value  Paper studying the return threshold for NYC building owners to carry out energy retrofits

Paper measuring the energy reductions for common efficiency improvements  Paper comparing market effects of benchmarking laws in 4 cities

Additional Resources

Energy and Commercial Mortgages Research
Currently, commercial mortgage underwriting, valuation, and asset management practices are not fully accounting for energy factors and the impact of energy costs on net operating income. This project aims to create a foundation for which scalable interventions can be developed to improve commercial mortgage underwriting and risk mitigation.

Energy and NOI: Links Between Energy and Financial Performance in a Single Portfolio
Empirical evidence is necessary to demonstrate the financial value of high-performance properties, and is critical to sustaining market demand and increasing investment in energy-efficient and green buildings. The goal of this project is to conduct empirical, quantitative, market-focused research on the impacts of energy efficiency and green building features on metrics of financial value, such as sale price, rents, vacancy rates, and others. The intent is to generate meaningful, actionable results capable of influencing commercial real estate practitioners – investors, owners, and managers – and encouraging greater investment in energy-efficient buildings.

Appraisal Toolkit
Commercial appraisers can play a critical role by valuing energy performance and high-performance building features appropriately in the appraisal process and providing accurate information for real estate investors seeking to increase value through energy-efficient strategies. The resources in this toolkit are designed to help simplify information gathering processes, provide industry background and context for owners, lenders, and appraisers, and link to key training opportunities that will assist appraisers in gathering the data and developing the skills needed to competently appraise high-performance commercial buildings and building attributes.