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

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.

Authors:

• Tuti Haryati Jasimin
• Hishamuddin Mohd Ali

Keywords:

• Green commercial office building
• Malaysia
• valuers’ perception
• valuation.

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.