This presentation is intended for investment professionals. Benchmarking of Real Estate Assets Operational v Design Labels

Transcription

1 This presentation is intended for investment professionals Benchmarking of Real Estate Assets Operational v Design Labels

2 It s about EXISTING STOCK - not new DEVELOPMENT 98% 2%

3 Current Carbon Penalties and Incentives Source, GPA, Deloitte,

4 The alphabet soup of metrics and labels s-i-r-e GRESB Honest Buildings

5 The alphabet soup of metrics and labels Energy Star 5

6 Not a simple thing to prove. Linking environmental and investment performance is not straightforward Multiple influences on performance Need complex statistics to distil the effect of energy efficiency Lots of data required - not easy in property (compared to equities and bonds) at a given point in time (cross-sectional) Over a long period of time (longitudinal) or Both (panel) Environmental and (for many countries) investment performance data has only been collected in recent times Longitudinal and panel studies barely feasible. Most reviews are cross-sectional Most major studies to date have been North American

7 Early evidence of possible benefits Results for buildings with Energy Star ratings Variable Impact of being green Rent per square foot +3% Effective rental income (adjusted for prevailing occupancy levels) +6% Sale prices +16% Total sample of 9,998 office buildings throughout the USA 893 green 1,816 offices sold between 2004 and green Rental information on 8, green Source: Eichholz P, Kok N and Quigley J (2009) Doing Well by Doing Good? Analysis of the Financial Performance of Green Office Buildings in the USA, RICS Research Report, London, March 2009, pp 9 and 28

8 Early evidence of possible benefits IPD & German Statistical Office 3.15% higher return for Energy Efficient Homes 1% decline in energy consumption % total return +0.08% uplift in comparable rents +0.45% uplift in market value IPD Australia Green Property Index (since 2012) Quarterly index comparing financial performance v Green ratings Green Asset label Green Operational label - outperforming the all A Grade office sector total return by 90bps - 4-6star A grade buildings outperformed 0-3.5star buildings 3 year annualised returns by 100bps 8

9 Varying results, similar trends Study Miller et al., (2008) Comments 2 to 4% higher occupancy rates 30% lower operating costs Wiley et al., (2008) 10 to18% higher occupancy rates Fuerst and McAllister (2010) 7 to 17% higher rents 3 to 8% higher occupancy rates Pivo and Fisher (2010) Fuerst and McAllister (2011) Up to 1.3% higher occupancy rates c5% higher rents 3 to 8% higher net operating income 50bps to 150bps lower capitalisation rates 7-11% higher market values. 6% higher rents 31-35% higher prices Controversial area of study

10 Other dimensions Energy Star energy efficiency driven LEED - Bundle of sustainable features Comments Overall price premium 16% 11% Influence of property size +ve +ve Size up, premium up Influence of property age -ve none Older, premium down Influence of property quality none +ve Premium, higher for better quality assets Influence of market conditions Link to scale of new construction -ve -ve More construction going on, lower the premium Link to changes in supply -ve -ve As above Link to vacancy rates +ve +ve looser the market, the higher the premium Trend Novelty? (premium fading away) no no Growing market acceptance? (premium growing over time) no yes 10

11 The information shown relates to the past. Past performance is not a guide to the future. The value of investment can go down as well as up. Any data contained herein which is attributed to a third party ("Third Party Data") is the property of (a) third party supplier(s) (the Owner ) and is licensed for use by Standard Life**. Third Party Data may not be copied or distributed. Third Party Data is provided as is and is not warranted to be accurate, complete or timely. To the extent permitted by applicable law, none of the Owner Standard Life** or any other third party (including any third party involved in providing and/or compiling Third Party Data) shall have any liability for Third Party Data or for any use made of Third Party Data. Past performance is no guarantee of future results. Neither the Owner nor any other third party sponsors, endorses or promotes the fund or product to which Third Party Data relates. **Standard Life means the relevant member of the Standard Life group, being Standard Life plc together with its subsidiaries, subsidiary undertakings and associated companies (whether direct or indirect) from time to time." Standard Life Investments Limited is registered in Scotland (SC123321) at 1 George Street, Edinburgh EH2 2LL. The Standard Life Investments group includes Standard Life Investments (Mutual Funds) Limited, SLTM Limited, Standard Life Investments (Corporate Funds) Limited, SL Capital Partners LLP and AIDA Capital Limited. Standard Life Investments Limited is authorised and regulated by the Financial Services Authority. Calls may be monitored and/or recorded to protect both you and us and help with our training Standard Life, images reproduced under licence 11