FMJ Facilities Management magazine providing industry-specific intelligence to FM and property professionals
Energy efficient assets report stronger investment performance across all sectors in 2023, according to CBRE’s latest Sustainability Index report.
The research found that inefficient commercial property assets recorded a fall of -6 per cent in capital value growth in 2023, compared to just -3.8 per cent for efficient assets.
The findings also demonstrate a correlation between the energy efficiency of commercial property assets and their investment performance. CBRE found total returns over 2023 were 0.8 per cent for efficient assets compared to -1.0 per cent for inefficient assets, while rental value growth was 3.9 per cent for both the efficient and the inefficient sample of properties over this period.
The office sector delivered stronger performance for efficient assets. Total returns for efficient offices were -3.2 per cent compared to -6.5 per cent for the inefficient sample during 2023. Capital value growth was -6.6 per cent for efficient offices compared with -10.6 per cent for inefficient assets, while rental value growth was 4.1 per cent for efficient assets and 3.2 per cent for inefficient, which according to CBRE indicates “a widening performance gap between efficient and inefficient offices” last year.
Higher returns for energy efficient assets in the retail sector were also reported. Efficient retail assets reported total returns of 3.1 per cent in 2023, compared to 0.3 per cent for the inefficient sample.
In the industrial sector, the research found that energy efficient industrial assets delivered stronger investment returns compared to inefficient industrial assets in 2023, at 5.6 per cent and 4.5 per cent respectively. However, inefficient industrial assets delivered stronger rental growth at 6.6 per cent compared to 5.6 per cent for efficient assets over the same period. CBRE noted that “energy efficiency does not influence values in the industrial sector to the same degree as the offices sector”.
Jennet Siebrits, CBRE’s Head of UK Research, said: “2023 saw interest rates plateau and capital value movements become less dramatic than in earlier years covered by the index. Yet inefficient offices saw a greater decline in capital values compared to more efficient offices, which is likely to reflect the impact of the capital expenditure needed to improve the energy efficiency and overall specification of secondary stock to a level that is acceptable to occupiers.”
Sam Carson, Head of Sustainability for Valuation and Advisory Services at CBRE UK, added: “This second iteration of the Sustainability Index shows the strong relative performance of efficient office and industrial assets through 2023 as we move into a new phase of the market cycle. Our valuers are seeing sustainability having an influence over new market conditions, even if current trading volumes are light, and the CBRE Sustainability Index provides evidence of this.”
Service Works Global (SWG) is conducting research in partnership with FMJ, to find out how you are using technology in your role through a short survey.
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To take part click here.
