Valuation of Green Commercial Office Building: A Preliminary Study of Malaysian Valuers’ Insight

Authors: Tuti Haryati Jasimin, Hishamuddin Mohd Ali

Abstract:

Malaysia’s green building development is gaining momentum and green buildings have become a key focus area, especially within the commercial sector with the encouragement of government legislation and policy. Due to the emerging awareness among the market players’ views of the benefits associated with the ownership of green buildings in Malaysia, there is a need for valuers to incorporate consideration of sustainability into their assessments of property market value to ensure the green buildings continue to increase in the market. This paper analyses the valuers’ current perception on the valuation practices with regard to the green issues in Malaysia. The study was based on a survey of registered real estate valuers and the experts whose work related to valuation in the Klang Valley area to rate their view regarding the perception on valuation of green building. The findings present evidence that even though Malaysian valuers have limited knowledge of green buildings, they recognise the importance of incorporating the green features in the valuation process. The inclusion of incorporating the green features in valuations in practice was hindered by the inadequacy of sufficient transaction data in the market. Furthermore, valuers experienced difficulty in identifying what are the various input parameters of green building and how to adjust it in order to reflect the benefit of sustainability features correctly in the valuation process. This paper focuses on the present challenges confronted by Malaysian valuers with regards to incorporating the green features in their valuation.

Keywords: Green commercial office building, Malaysia, valuers’ perception, valuation.

Digital Object Identifier (DOI): doi.org/10.5281/zenodo.1109003

References:

[1] Rahim, (2011). The Value of Going Green. Retrieved at www.thestar.com.my.
[2] Ellis, C. R. (2009). Who Pays for Green? The Economics of Sustainable Buildings..
[3] Chua, S. C., & Oh, T. H. (2011). Green Progress and Prospect in Malaysia. Renewable and Sustainable Energy Reviews, 15(6), 2850– 2861. doi:10.1016/j.rser.2011.03.008.
[4] Adnan, Y. M., & Daud, N. (2010). Factors Influencing Office Building Occupation Decision by Tenants in Kuala Lumpur City Centre–A Delphi Study. Journal Od Design and BUilt Environment, 6, 63–82.
[5] Pengfei, W. (2011). How to Effectively Integrate Sustainability into Property.
[6] Schumann, B. (2010). Impact of Sustainability on Property Values. University of Regensburg.
[7] Boyd, T. (2005). Can We Assess the Worth of Environmental and Social Characteristics in Investment Property ?.
[8] Lützkendorf, T., & Lorenz, D. (2005). Sustainable Property Investment: Valuing Sustainable Buildings through Property Performance Assessment. Building Research & Information, 33(3), 212–234.
[9] Reed, R. G., & Wilkinson, S. (2007). Sustainability and the Value of Office Buildings–Will the Market Pay for Green Buildings ? In 12th annual Asian Real Estate Society (AsRES) Conference - 9th-12th July 2007, Macau, China. (pp. 1–18).
[10] Warren-Myers, G. (2013). Is the Valuer the Barrier to Identifying the Value of Sustainability? Journal of Property Investment & Finance, 31(4), 345–359.
[11] RICS. (2014). RICS Valuation–Professional Standards January 2014.W. D. Doyle.
[12] Myers, G., Reed, R., & Robinson, J. (2007). The Relationship between Sustainability and the Value of Office Buildings, (January), 1–22.
[13] Moran, K. (2010). The Effect of Sustainability on Property Value. Rinker School of Building Construction.
[14] Lorenz, D., Trück, S., & Lützkendorf, T. (2006). Addressing Risk and Uncertainty in Property Valuations: A Viewpoint from Germany. Journal of Property Investment & Finance, 24(5), 400–433.
[15] Babawale, G. K., & Oyalowo, B. A. (2011). Incorporating Sustainability into Real Estate Valuation: the Perception of Nigerian Valuers. Journal of Sustainable Development, 4(4), 236–249.
[16] The Board of Valuers, A. and E. A. M. (2006). Malaysian Valuation Standard (pp. 1–7).
[17] Heralova, R. S. (2011). Sustainable Buildings: Market Value And Market Share. Organization, Technology and Management in Construction: An International Journal, 3(1).
[18] Runde, T. P., & Thoyre, S. (2010). Integrating Sustainability and Green Building into the Appraisal Process. Journal of Sustainable Real Estate, 2 (1).
[19] Lorenz, D. P., Trück, S., & Lützkendorf, T. (2007). Exploring the Relationship between the Sustainability of Construction and Market Value: Theoretical Basics and Initial Empirical Results from the Residential Property Sector. Property Management, 25(2), 119–149.
[20] Warren, C., & Myers, G. W. (2009). Valuation and Sustainability are Rating Tools Enough? European Real Estate Society Conference Stockholm, Sweden 24‐27. In European Real Estate Society Conference Stockholm, Sweden 24‐27th June 2009 Dr (pp. 1–16). Stockholm, Sweden.
[21] Wan Ismail, W. N., & Abdul Majid, R. (2014). The Impact of Green Features on Property Valuation Procedure. In International Real Estate Research Symposium (pp. 1–15). Kuala Lumpur.
[22] Eichholtz, P., Kok, N., & Quigley, J. M. (2010). Doing Well by Doing Good ? Green Office Buildings (Vol. 100, pp. 2494–2511).
[23] Magnus, B. (2013). Economics Studies of Green Commercial Buildings in Sweeden.
[24] Warren-myers, G. (2011). Sustainability-The Crucial Challenge for the Valuation Profession. Journal of Property Research, 17(4), 491–510.
[25] Nurick, S., Jeune, K. Le, Dawber, E., Flowers, R., & Wilkinson, J. (2013). Incorporating GBFIs into Commercial Property Valuation. In European Real Estate Society 20th Annual Conference 2013.
[26] Lorenz, D., & Lützkendorf, T. (2011). Sustainability and Property Valuation: Systematisation of Existing Approaches and Recommendations for Future Action. Journal of Property Investment & Finance (Vol. 29, pp. 644–676).
[27] R.Lowe, T., & Chappell, T. W. (2007). Special Considerations in the Valuation of Sustainable Properties (pp. 38–44).
[28] RICS. (2009). Sustainability and Commercial Property Valuation. Westwood Business Park, London.
[29] Armitage, L., Murugan, A., & Kato, H. (2011). Green Offices in Australia: A User Perception Survey. Journal of Corporate Real Estate, 13(3), 169–180.
[30] Lützkendorf, T., & Lorenz, D. (2011). Capturing Sustainability-Related Information for Property Valuation. Building Research & Information, 39(3), 256–273.
[31] Sayce, S., Smith, J., Cooper, R. and Venmore-Rowland, P. (2006), Real Estate Appraisal: From Value to Worth, Blackwell, Oxford.