Capital Value Up & Operating Costs Down after Energy Retrofits
A new study shows that retrofitting commercial buildings can lead to an increase in their property value, with average expected savings in operating expenses of 10%, and an increase in capital value of about 2%. And companies that want to retrofit their buildings to make them greener but cannot afford to pay upfront will be given a helping hand, in a new initiative by Singapore’s building authority, offering 15 loans of up to S$5 million each to commercial property owners, condominium managements and energy services firms.

By Jessica Cheam, The Straits Times (15 September 2011):

COMPANIES that want to retrofit their buildings to make them greener but cannot afford to pay upfront will be given a helping hand, in a new initiative by Singapore’s building authority.

Fifteen loans of up to $5 million each will be made available for commercial property owners, condominium managements and energy services firms.

These will help them carry out work such as installing more energy-efficient air-conditioning or lighting systems or improving their recycling facilities.

Meanwhile, those who go ahead with the retrofitting will have to meet higher environmental standards and conduct compulsory energy audits once every three years under planned amendments to Singapore’s building laws.

The measures were unveiled yesterday by Minister of State for National Development Tan Chuan-Jin.

He said that while the upfront cost of meeting these standards might be high, it would be covered by the eventual energy savings.

Singapore is ‘probably one of the first few countries in the world which mandates energy efficiency standards for existing buildings’, he added.

The new financing scheme by the Building and Construction Authority will initially disburse the loans over two years. It will work with United Overseas Bank and Standard Chartered, which will set the interest rates at a minimum of 3.5 per cent.

The loans will last between 11/2 and seven years, and the authority will share the risk of any default with the banks. It will also consult the building industry about the proposed changes to legislation.

Mr Tai Lee Siang, president of the Singapore Green Building Council, an industry association, told The Straits Times that he welcomed the new initiative. ‘Nothing speaks more than real funds committed to assist the transformation of our existing assets.’

He said that although the bigger developers might not see this ‘as the biggest carrot’, the scheme would attract small and medium- sized businesses in particular, as it was not easy for them to secure such loans.

Mr Tai also welcomed the proposed changes to building codes. ‘I’m a fan of legislation if it’s for a good purpose,’ he said. Not many countries can do this… Singapore has the political will, industry support and maturity of market.’

Standard Chartered Bank’s head of medium enterprise, Mr Lam Kum Weng, said the bank was pleased to embark on this landmark financing scheme.

‘We are glad to be able to support the segment of customers and buildings to fund the cost of making buildings energy efficient,’ he said.

‘The reduction in electricity bill and cost savings will be substantial and we foresee this will be a major breakthrough for the industry.’

Mr Vincent Leow, vice-president of business development for local energy services firm G-Energy Global, said it was thinking of applying for the new financing scheme with a client which owns a building. ‘This will encourage many of our clients to do retrofits, as cost is a big factor,’ he said.

The Building and Construction Authority said the new initiative complements its existing $100 million Green Mark Incentive Scheme, which provides grants to building owners who carry out retrofits.

Brigadier-General (NS) Tan added that this scheme was being reviewed to see how building owners could be further encouraged to do so. He was speaking to a 700-strong crowd of industry experts at the opening of the International Green Building Conference.

The three-day event at Suntec City is part of the Singapore Green Building Week, now in its third year. It gathers policymakers, businesses and experts to discuss green building related topics.

Source: www.greenbusinesstimes.com

BCA-NUS study shows that greening existing buildings can increase property value, Singapore (16 September 2011):

Retrofitting commercial buildings can lead to an increase in their property value. With an average expected savings in operating expenses of 10% resulting from the retrofitting, commercial buildings could reap an increase in capital value of about 2%.

This is one of the key findings of a joint study, by the Building and Construction Authority (BCA) and the Department of Real Estate (DRE) in National University of Singapore (NUS) in collaboration with the top six real estate consultancy firms – CB Richard Ellis, Chesterton Suntec, Colliers International, DTZ Tie Leung, Jones Lang LaSalle and Knight Frank, on how green buildings can impact their property value.

“There is now greater awareness in the industry that the upfront cost of retrofitting energy inefficient buildings can be recovered in about 4 to 7 years,” said Mr Quek See Tiat, Chairman, BCA, at the Breakfast Talk for CEOs on the last day of the 2011 International Green Building Conference today. “However, many do not realise that another potential economic benefit is the potential enhancement in the property value for green and energy efficient buildings.”

Initiated by BCA and the Department of Real Estate, National University of Singapore in February 2011, the study aimed to evaluate whether Green Mark-rated commercial buildings have an impact on commercial property valuation. A sample of 23 commercial properties from office, retail, hotel and a mix of these uses were used in the study. Key factors considered included the tenure and age of the property, its location (district code), the Gross Floor Area and Net Lettable Area, the BCA Green Mark award rating and year awarded, energy consumption figures (before and after retrofit) and the capital expenditure for the retrofit project.

In addition to the key finding that property value can indeed increase by greening and retrofitting existing buildings to be more energy efficient, the study found that:

• Retrofitting to achieve the standard BCA Green Mark certification can result in a significant reduction in energy consumption. The average savings from the buildings sampled after retrofitting is about 17% of the total building’s energy consumption compared to before retrofitting. If measured by the area of the buildings where the owners are responsible for paying for the utilities, the average savings is even higher at nearly 30%.
• The effort to achieve Green Mark certification need not be costly. If the retrofit cost is expressed as a percentage of the current market value of property, it is 0.5% for retail and 1% for offices. There is also no significant disruption to both owners and users in their continuous occupation and operations.

As a next step, the Department of Real Estate in NUS is developing a valuation guideline for green commercial properties that will take into account the cost and benefit of newly developed and retrofitted green commercial properties. This will be done in collaboration with representatives from the six real estate consultancy firms and BCA. Additionally, BCA is working with the Singapore Institute of Surveyors and Valuers (SISV) to incorporate guidelines on green building valuation.

Eight leading developers and building owners also signed the Green Pledge to show their commitment to attain higher energy efficiency of their existing buildings through the BCA Green Mark certification by 2020. They are Allgreen Properties Ltd, Ascendas Land (Singapore) Pte Ltd, CapitaLand Limited, City Developments Ltd, Frasers Centrepoint Limited, Furama Hotels International, Keppel Land Limited and Lend Lease.

Source: www.bca.gov.sg