South African Green Star office properties net higher returns
Green Star Certified office buildings outperform similar uncertified buildings by 3.8%. According to the IPD South Africa Annual Green Property Index released by MSCI, in conjunction with the Green Building Council South Africa (GBCSA) and sponsored by Growthpoint Properties, certified properties delivered a total return of 11.6% during 2017.
Presented by MSCI on 8 August 2018 at a GBCSA member event in Cape Town, the Index found the better returns were driven by quicker capital growth, lower vacancies and a higher net income growth. Likewise, the Green Star certified sample’s lower discount rate also contributed and suggests higher certainty around certified properties’ cash flow and tenant retention.
As opposed to similar uncertified buildings, which delivered an 8.0% total return, the Green Star Certified office sample used 24% less water per occupied square meter than similar properties without Green Star certification. This was especially impressive given the current focus on water consumption nationally.
In December 2017, the IPD South African Annual universe consisted of 1 649 properties valued at more than R355.6 billion, of which the Green Property Index considered a subset of 285 Prime and A-Grade offices valued at over R54.2 billion. The Green Star certified subset consisted of 85 buildings with a combined capital value of R20.4 billion. This is significantly more than the 49 Green Star buildings in the previous year’s sample, highlighting the growth in the number of Green Star certified buildings.
This is very good news for property investors, property owners and property developers, who will all benefit from the better returns demonstrated from investing, owning and developing green buildings in the South African context, where the pressure to deliver better returns is extremely high.
“We are pleased to work alongside MSCI in the release of this Index because it’s important for us to understand the nature of why building green is so popular – beyond the fact that it is the right thing to do. The verified annual data provided by the IPD South Africa Annual Green Property Index provides the GBCSA and its partners with excellent insight in unpacking the business case and advocating for a wider adoption of green building practices both within the commercial sector and in other sectors where they are gaining traction,” comments GBCSA CEO Dorah Modise.