Assessing the impact of the intensifying UK minimum energy efficiency standards (MEES) on regional office rental values

다국어 초록 (Multilingual Abstract)

Since the introduction of the UK Minimum Energy Efficiency Standards (MEES) in April 2018, commercial buildings with a substandard Energy Performance Certificate (EPC) rating may be deemed untenable, depreciate in value and become obsolete. This paper aims to establish the value of the EPC in UK commercial buildings utilizing the hedonic pricing model and how the intensifying MEES might affect these values. The findings can then inform investors and developers in the Real Estate Development (RED) industry of the risks associated with low energy-performing assets. The missing link between environmental performance and property value is the consideration of the local market’s response to sustainability. Subsequently, this paper focusses on market location and environmental performance as the key regression variables. Data has been collated on 5444 commercial office buildings across the 12 UK regions, sourced from CoStar UK and the Ministry of Housing, Communities and Local Government Non-Domestic Energy Performance Register. The regression results indicate the first statistically significant findings relating to the EPC and office rental values. Interaction variables between the EPC and regional location also reveal that the value for energy performance is perhaps weakest in Yorkshire and the Humber and the East Midlands. However, both findings should be treated with caution, where the variables’ coefficients are insignificant relative to all other regression variables. The magnitude of the separate regional variables indicates potential implications for North East and South East office landlords and tenants, particularly where these regions demonstrate some of the lowest and highest levels of building quality respectively and thus, potentially lower and higher levels of energy performance. Developers and investors who own substandard EPC-rated offices in the RED industry might also benefit from renovation premiums and simultaneously protect themselves against the intensifying MEES, if they renovate their building to a sufficient EPC grade.

참고문헌 (Reference)

1 Eppli, M. J., "Valuing the new urbanism: The impact of the new urbanism on prices of single-family homes" Urban Land Institute 1999

2 Muldavin, S. R., "Value beyond cost savings: How to underwrite sustainable properties" Green Building Finance Consortium 2010

3 Monson, M., "Valuation using hedonic pricing models" 7 : 62-73, 2009

4 McKinsey, "Unlocking energy efficiency in the US Economy" McKinsey Global Energy and Materials, McKinsey and Company

5 Knight Frank, "UK regional cities: Office market review"

6 Aroul, R. R., "The value of ‘Green’: Evidence from the first mandatory residential green building program" 34 (34): 27-49, 2012

7 Fuerst, F., "The impact of energy performance certificates on the rental and capital values of commercial property assets" 39 (39): 6608-6614, 2011

8 Nils Kok, "The impact of energy labels and accessibility on office rents" Elsevier BV 46 : 489-497, 2012

9 McAllister, P., "The economy of sustainable construction" Ruby Press 338-347, 2013

10 Sirmans, G. S., "The composition of hedonic pricing models" 1 (1): 3-43, 2005

11 CoStar, "The CoStar five-star building rating system" CoStar UK

12 Cowan, E., "Sustainability for suburbs" 4 (4): 212-241, 2012

13 Chegut, A., "Supply, demand and the value of green buildings" 51 (51): 22-43, 2014

14 Stern, N., "Stern review on the economics of climate change" Government Economic Service 2006

15 Edwards, B., "Rough guide to sustainability: A design primer" RIBA Publishing 2014

16 Hoesli, M., "Property investment: Principles and practice of portfolio management" Routledge 2000

17 Knight Frank, "Newcastle: North East property market report"

18 Eurostat, "NUTS – nomenclature of territorial units for statistics background"

19 Knight Frank, "Minimum Energy Efficient Standards (MEES): Protecting your assets"

20 RICS, "Minimum Energy Efficiency Standards (MEES): Impact on UK property management and valuation" RICS Insight

21 Savills, "Market watch: Greater London and South East Offices – January 2018"

22 Fuerst, F., "How does environmental efficiency impact on the rents of commercial offices in the UK?" 32 (32): 193-216, 2015

23 Malpezzi, S., "Housing Economics and Public Policy" 67-89, 2008

24 Rosen, S., "Hedonic prices and explicit markets: Production differentiation in pure competition" 82 : 34-55, 1974

25 De Haan, J., "Handbook on residential property price indices" Eurostat 2013

26 GVA, "Green to gold report"

27 Oyedokun, T. B., "Green premium as a driver of green-labelled commercial buildings in the developing countries: Lessons from the UK and US" 6 : 723-733, 2017

28 UN Environment, "Global status report 2017" International Energy Agency

29 Tim Dixon, "Facing the future: energy performance certificates and commercial property" Emerald 26 (26): 96-100, 2008

30 Follain, J. R., "Dissecting housing value and rent: Estimates of hedonic indexes for thirty-nine large SMAs" The Urban Institute 1980

31 Claire Roberts, "Comparing “socially responsible” and “sustainable” commercial property investment" Emerald 27 (27): 470-480, 2009

32 Thomas Lützkendorf, "Capturing sustainability-related information for property valuation" Informa UK Limited 39 (39): 256-273, 2011

33 Huiping Wu, "Can Likert Scales be Treated as Interval Scales?—A Simulation Study" Informa UK Limited 43 (43): 527-532, 2017

34 Akaike, H., "Breakthroughs in statistics volume 1. Foundations and basic theory. Springer series in statistics, perspectives in statistics" Springer-Verlag 599-609, 1973

35 Gujarati, D. N., "Basic econometrics" McGraw-Hill Education 2009

36 McDonald, J. F., "A survey of econometric models of office markets" 10 (10): 223-242, 2002