Appraisal Related Resources for High Performance and Energy Efficient Commercial Buildings

For Appraisers, Investors, Owners and Other Users of Commercial Appraisal Services

Historically, there has been a disconnect in commercial real estate between building developers, owners, and investors when attempting to identify the best method of analyzing an investment in energy efficient, green building, or high performance building features. This challenge is often reflected in the appraisal process for commercial real estate, where a lack of information exchange between the involved parties can lead to missed opportunities and valuations that do not effectively incorporate the costs and benefits of energy efficiency. To address this challenge, DOE developed a working group that included The Appraisal Foundation, Appraisal Institute, appraisal professionals with experience in green and high performance buildings, lenders, and commercial real estate sustainability leaders.

Commercial appraisers can play a critical role by appropriately valuing energy performance and high performance building features in the appraisal process and providing accurate information for real estate investors seeking to increase value through energy efficient strategies. The resources below were reviewed and selected by the working group participants, and 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.

Guidance on High Performance Buildings and Energy Efficiency

 

 

Valuation Advisory #9: Valuation of Green and High-Performance Property: Commercial, Multi-family, and Institutional Properties
The Appraisal Practices Board of the Appraisal Foundation developed this Advisory, which identifies areas where green building features and market conditions impact the valuation assignment process, such as in the development of a scope of work, information gathering, analysis techniques, and measuring impacts on market value. 

Valuation Advisory #6:  Valuation of Green and High Performance Property: Background and Core Competency
The Appraisal Practices Board of the Appraisal Foundation created this document, which provides voluntary guidance to appraisers regarding the competency that is needed to value high performance buildings, buildings with “green features”, and buildings that exist in a market that values high performance buildings.

Value Beyond Cost Savings
This book, written by Scott Muldavin of the Green Building Finance Consortium, presents the key findings and recommendations regarding the valuation and underwriting of sustainable properties based on three years of independent research by the Green Building Finance Consortium.

The Appraisal of Real Estate, 14th ed.
Chapter 13: “Building Description” of this textbook developed by the Appraisal Institute provides readers with direction for identifying and including energy and high performance building features in appraisal reports.

The Dictionary of Real Estate Appraisal, 6th ed.
The “Green Building Glossary” of this textbook developed by the Appraisal Institute lists a number of useful green building terminology to help readers develop fluency and understand how various green building features can affect property value.

Courses and Seminars

 

 

Energy Matters: New Tools for Commercial Building Valuation
The U.S. Department of Energy sponsored the development of this course to assist commercial appraisers in advancing their expertise in analyzing energy characteristics of energy efficient, green, and high-performing buildings. The course provides an overview of energy use and its increasing relevance as a performance metric in commercial real estate, explains the key energy and high-performance information that should be evaluated during the appraisal process, and discusses the integration of reports and information generated from three Department of Energy and Environmental Protection Agency tools.

Introduction to Green Buildings:  Principles & Concepts
This introductory training course offered by the Appraisal Institute focuses on the evolution of green buildings, the concept of sustainability in buildings, and the principles, practices, and components that differentiate sustainable and conventional buildings.

Case Studies in Appraising Green Commercial Buildings
This Appraisal Institute course provides practical application of techniques available to commercial appraisers valuing high performance buildings, beginning with a brief review of green principles and concepts, the course includes in-depth commercial case studies that explore techniques for valuation.

Residential and Commercial Valuation of Solar
This Appraisal Institute course introduces appraisers to solar photovoltaic (PV) terminology, and uses real-life examples and case studies with commonly encountered solar PV systems to show trainees how to solve solar-related valuation problems.

Net Zero Energy Buildings: An Introduction for Valuation Professionals
The unique features of Net Zero Energy Buildings can present challenges for appraisers, and this webinar, created in collaboration  by The Appraisal Institute collaborated and Tim Runde of Runde & Partners, Inc., provides an overview of the steps appraisers should take when taking on an assignment for a Net Zero Energy building.

The Valuation of Green Commercial Real Estate
This textbook from the Appraisal Institute is designed to provide appraisers and others with an in-depth understanding of green terminology and concepts: information needed to identify and value the green property features found in new construction and commercial building renovations. It examines green building rating systems, the advanced building design and operating characteristics that make a commercial building energy-efficient and sustainable, and the effects of these innovations on the valuation process.

Reference Resources

 

 

Guide for Appraising High-Performance Properties
Designed to assist both appraisers and users of appraisal services, this guidance document from the Department of Energy applies lessons learned from real-world appraisal of high-performance properties. It offers examples of the types of high-performance information that owners can provide to appraisers and proposes specific examples of where and how this high-performance building information can be incorporated into an appraisal.

Sample Scope of Work Language for Appraisers Valuing High Performance and Energy Efficient Buildings
In order to streamline efforts and encourage appraisers to conduct high performance appraisals, the Department of Energy, with input from its Appraisal Working Group, has created this resource to provide background information and sample language that could be included in an appraisal’s Scope of Work.

Guidance for Owners: Ordering Appraisals of High Performance and Energy Efficient Buildings
To help generate demand for high performance appraisals and appraisers competent to execute them, the Department of Energy developed this resource with input from its Appraisal Working Group. The document provides building owners with step-by-step guidance for ordering a high performance appraisal.

Commercial Green and Energy Efficient Addendum
The Appraisal Institute's Commercial Green and Energy Efficient Addendum provides forms and guidance to assist appraisers in analyzing high performance features and properties.

High Performance Buildings and Property Value – A Primer for Lenders
The Institute for Market Transformation, Appraisal Institute, and Washington, D.C. Department of Energy and Environment combined to create this guide, which aims to help lenders understand the valuation of high-performance buildings by focusing on these features impact the four components of value. 

Measuring the Potential Impact of Green Leases in the US Office Sector
A study, developed by the Institute for Market Transformation, that estimates the potential energy reductions, efficiency improvements, and economic benefits that could be achieved through widespread adoption of green leasing practices.

Green Building and Property Value: A Primer for Building Owners and Developers
The Institute for Market Transformation and the Appraisal Institute combined to develop this guidance document that explains how high performance building attributes can impact the four components of value for commercial real estate owners and developers and provides tips for engaging with lenders and appraisers.

Recognition of Energy Costs and Energy Performance in Real Property Valuation
The aim of this resource, developed by the Institute for Market Transformation and the Appraisal Institute, is to increase credibility and reliability of property valuation by helping appraisers and other interested parties to understand, find, and rigorously apply available information on energy performance in buildings.

Greenprint Performance Report
Each year, the Urban Land Institute's Greenprint Center for Building Performance publishes this report to provide a consolidated view of participating properties, highlighting environmental performance by geography and property type.

Case Studies

 

 

High Performance Green Building: What’s it Worth?
The case studies presented by the International Living Future Institute and the Cascadia Chapter of the United States Green Building Council in this report are designed to help bridge the gap in understanding between the building design and real estate investment communities by providing information about the valuation of high performance green buildings with a focus on commercial investment office properties.

High Performing Buildings Magazine
This free publication is offered online by the American Society of Heating, Refrigerating, and Air-Conditioning Engineers (ASHRAE), and includes useful case studies regarding high performance buildings in each edition, as well as a variety of resources to inform readers about specific building components.

Smart Investments in Energy Efficiency: A Look at the Portrait Building in Washington, D.C.
This case study, written by the Institute for Market Transformation, examines recent energy improvements to The Portrait Building in downtown Washington, D.C. as a real-world example of how investment in energy efficiency can yield significant financial benefits. 

Valuing Energy Efficiency: Beyond the Empire State Building case study series
A case study by the Institute for Market Transformation that analyzes the financial outlay and impact of energy efficiency retrofits on a diverse set of property types throughout the U.S. to explore the depth of retrofit opportunities in existing buildings.

Applying Energy Data Tools to Inform the Valuation of Commercial Buildings
This case study, developed by the U.S. Department of Energy, provides examples of how EPA’s ENERGY STAR® Portfolio Manager®, DOE’s Building Energy Asset Score, and DOE’s Building Performance Database can be incorporated into commercial real estate valuation processes to identify the effects of energy efficiency upgrades on asset value.

Appraisal of Green and High-Performance Buildings
This case study was developed through the participation of Principal Real Estate Investors in the DOE's appraisal working group and creates a foundation for understanding and addressing the energy-related challenges associated with the commercial real estate appraisal process.

Websites and Useful Links

 

 

The Appraisal Foundation: Resources
Resources and access to Valuation Advisories issued by the Appraisal Practices Board (APB), which are documents that offer voluntary guidance on recognized valuation methods and techniques.

Appraisal Institute: All Things “Green”
A variety of tools, webinars, and training courses available for use through the Appraisal Institute.

Building Performance Database (BPD)
The Department of Energy’s BPD is a free, publicly accessible database that holds the nation's largest dataset of the energy-related characteristics of commercial and residential buildings. The BPD is consists of data collected by Federal, State and local governments, utilities, energy efficiency programs, building owners and private companies, that has been combined, cleansed and anonymized for public use. Users can explore data across real estate sectors and regions, and compare various physical and operational characteristics to gain a better understanding of market conditions and trends in energy performance.