• Institute for Sustainable Investing

Unlocking Real-Estate Value by Going Green

New green technology could boost asset values of US office buildings by as much as $35 billion.

Saving the planet is not the only reason why investors should seek out  buildings that use green technology. 

A new report, released by Morgan Stanley’s Institute for Sustainable Investing, argues that sustainable technology can cut a typical office building's annual expenses by 3% to 30%1, depending on what US city it’s in.

These savings can potentially add $3.5 billion-$34.9 billion2  of asset value in the 10 largest US commercial real-estate markets. The report details the yearly utility savings in each of those 10 US cities, which can range from $32 million in Philadelphia to $239 million in New York. That potentially adds $489 million to $4.8 billion of asset value

Below is a before and after picture of the value created through a green retrofit of an existing office building.

Potential Savings in Five Major Cost Areas From Sustainable Building Management Practices for a Theoretical 250,000 Square-Foot Building in San Francisco

Cost Before Retrofit
Savings
Cost After Retrofit
$40,658
Waste
0%
$30,492
$658,818
Repair
0%
$533,642
$567,697
Electricity
0%
$510,927
$129,499
Other Utilities
0%
$116,549
$159,157
Insurance
0%
$151,199
Improved Occupancy Rates
+2%
Rent Premium
$279,707 (+3%)
Improved Net Operating Income
$777,559 ($3.11 per sq ft)
Added Asset Value3
$14.1 million ($56.55 per sq ft)


1 “Green Retrofitting Costs and Benefits: A New Research Agenda”, National University of Singapore and Institute of Real Estate Studies, 2011; accessed on 1/26/2016).

2 Calculated by the Morgan Stanley Real Estate Investing Team (MSREI) using BOMA Experience Exchange Reports, CBRE market inventory data, and Real Capital Analytics market valuations.

3 Calculated by the MSREI team using BOMA Experience Exchange Reports.


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