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Article
Publication date: 19 May 2023

Syeda Marjia Hossain, Jorn van de Wetering, Steven Devaney and Sarah Sayce

This paper investigates the extent to which commercial property valuers in the UK refer to Royal Institution of Chartered Surveyors (RICS) professional standards and guidance on…

Abstract

Purpose

This paper investigates the extent to which commercial property valuers in the UK refer to Royal Institution of Chartered Surveyors (RICS) professional standards and guidance on the inclusion of sustainability in valuation reports. Data collection, analysis and reporting related to sustainability attributes is examined, as well as the perceived importance of these attributes to clients and any value impacts that are associated with them.

Design/methodology/approach

An online survey of UK commercial property valuers was conducted from July to September 2019. The survey included both structured and open-ended questions.

Findings

Reference to RICS standards and guidance on sustainability has improved since earlier research. However, progress on data collection is still limited. At the time of the survey, UK valuers indicated that sustainability attributes were of more importance to owner-occupiers than investors and lenders. UK valuers also indicated that, out of a range of sustainability attributes, only certification was influencing market value (MV) and investment value (IV) to any great extent.

Research limitations/implications

The online survey had 53 responses and this limited the ability to draw definitive conclusions. Hence, whilst the results may be indicative of the perceptions of some valuers of the significance of sustainability-related matters in the UK, the sample is not large enough to be considered representative of the opinions of property valuers per se in the UK.

Practical implications

Explicit reflection of sustainability in market or investment values is still limited in the UK valuation practice, but there are challenges faced by valuers that need further investigation, including difficulties in pricing sustainability attributes.

Originality/value

This is the first empirical investigation of the perception of sustainability by valuers in the UK commercial property market since the 2012 survey reported by Michl et al. (2016).

Details

Journal of Property Investment & Finance, vol. 41 no. 4
Type: Research Article
ISSN: 1463-578X

Keywords

Article
Publication date: 14 April 2020

Sara Jane Wilkinson and Sarah Sayce

About 27 per cent of the total UK carbon emissions are attributed to residential buildings; therefore, improvements to the energy efficiency of the stock offers great potential…

Abstract

Purpose

About 27 per cent of the total UK carbon emissions are attributed to residential buildings; therefore, improvements to the energy efficiency of the stock offers great potential. There are three main ways to achieve this. First is a mandatory approach, minimum energy efficiency standards are set and applied to new and existing buildings. Option 2 is voluntary, using energy ratings that classify performance to stimulate awareness and action. Third, financial measures, incentives and taxes, are applied to “nudge” behaviours. Most westernised countries have adopted a combination of Options 2 and 3, with the belief that the market will incentivize efficient properties. The belief is voluntary measures will stimulate demand, leading to value premiums. This paper aims to seek a deeper understanding of the relationship between energy efficiency and the value of residential property in Europe and, by so doing, to determine whether stronger policies are required to realise decarbonisation.

Design/methodology/approach

This paper reviews the current academic literature and large-scale quantitative studies conducted in Europe, mostly using hedonic pricing analysis to seek a relationship between energy performance certificates (EPCs) and either capital or rental values. It compares these to the reported findings of three case study projects that take a variety of different research approaches, all of which have the ambition to understand market behaviours and stimulate occupier or/and owner demand for energy efficient buildings.

Findings

The large-scale academic study results generally show a positive relationship between observed market prices and EPCs, which are commonly taken as surrogates for efficiency; however, outcomes are variable. One large study found energy upgrades may increase value, but not to the point where costs outweigh the value gain. Other studies found high returns on investment in energy efficiency technologies. The case study projects, however, revealed a more nuanced set of arguments in terms of the relationship between energy efficiency and market behaviours. Whilst there is some evidence that energy efficiency is beginning to impact on value, it is small compared to other value drivers; other drivers, including health, well-being and private sector finance deals, may prove more powerful market drivers. Further, the empirical findings reported point towards the emergence of a “brown” discount being more likely to be the long-term trend than a green premium. It is concluded that the current levels of action are unlikely to deliver the levels of decarbonisation urgently needed.

Research limitations/implications

This is a desktop study of other European studies that may have collected data on slightly different variables.

Practical implications

This study shows that more action is required to realise decarbonisation in new and existing residential property in the European states considered. The sector offers potential for substantial reductions, and other mandatory approaches need to be considered.

Originality/value

This is a timely review of the current outcomes of European programmes (EPCs) adopted in several countries to increase energy efficiency in the residential sector through a voluntary mechanism. The results show that more action is needed.

Details

Journal of European Real Estate Research , vol. 13 no. 3
Type: Research Article
ISSN: 1753-9269

Keywords

Article
Publication date: 13 April 2022

Sarah Louise Sayce, Jim Clayton, Steven Devaney and Jorn van de Wetering

The authors outline a framework that captures the channels through which physical climate risks could affect cash flows and pricing of income-producing real estate. This…

Abstract

Purpose

The authors outline a framework that captures the channels through which physical climate risks could affect cash flows and pricing of income-producing real estate. This facilitates detailed consideration of how the future performance of real estate investments could be affected by such risks.

Design/methodology/approach

This is a literature-based investigation that draws on work commissioned by UNEP-FI (Clayton et al., 2021a, b). It extends this work to consider in more detail the channels through which climate risks may impact property performance and the implications for the valuation community.

Findings

Recent empirical studies have identified more instances where pricing is reflecting both current and anticipated climate risks. Market valuations cannot properly incorporate climate risk without clear evidence that it is priced by market participants, but valuers can advise clients on the potential for future impacts.

Research limitations/implications

While inferences can be made from studies of residential real estate, more research on commercial real estate pricing and climate risk is required to assist valuers and their clients, as well as other stakeholders in the real estate market.

Practical implications

Differences between a Market Value and an Investment Value context are considered, and how valuers could and should account for climate risk in each setting is discussed with reference to existing professional standards and guidance.

Originality/value

The article synthesises a wide range of literature to produce a framework for the channels by which real estate values could be influenced by climate risk.

Details

Journal of Property Investment & Finance, vol. 40 no. 4
Type: Research Article
ISSN: 1463-578X

Keywords

Article
Publication date: 1 December 1998

Sarah Sayce and Owen Connellan

The valuation and management of landed properties owned by public authorities provides a useful case study for developing arguments relating to the “test of a good valuation” and…

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Abstract

The valuation and management of landed properties owned by public authorities provides a useful case study for developing arguments relating to the “test of a good valuation” and in particular the inter‐relationship between purpose and method of valuation. The paper reviews the changing requirements placed on the valuation process and the growing and recognised need for valuers to be cognisant of the difference between the concepts of value‐in‐exchange (market price valuations) and value‐in‐use (calculations of worth) and to question the underlying purpose of valuations in the management process. Research work by the authors highlights the difficulties in accommodating these changes in the field of publicly‐owned leisure properties. The paper concludes that such valuations as have been prepared for leisure properties do not aid good management and are peripheral to the management decision‐making process. It suggests that for valuations to gain relevance to managers of owner‐occupied property, new concepts should be debated. In the public sector, “social value” is postulated as one avenue worthy of exploration.

Details

Property Management, vol. 16 no. 4
Type: Research Article
ISSN: 0263-7472

Keywords

Article
Publication date: 1 May 2020

Sarah Louise Sayce and Syeda Marjia Hossain

The paper investigates the initial impacts on asset management and valuation practice of the Minimum Energy Efficiency Standard (MEES) introduced in England and Wales from April…

Abstract

Purpose

The paper investigates the initial impacts on asset management and valuation practice of the Minimum Energy Efficiency Standard (MEES) introduced in England and Wales from April 2018 for new lettings.

Design/methodology/approach

The paper reports findings from a small-scale pilot study of valuers, asset managers, lawyers and building consultants. Interviews were conducted over the summer of 2019 and explored the impact on practice and market values and perceived links to the carbon reduction agenda. Data were analysed thematically manually and using NVivo software.

Findings

Participants welcomed MEES but many had doubts about the use of energy performance certificates (EPCs) as the appropriate baseline measure. Compliance was perceived as too easy; further, enforcement is not occurring. Vanguard investors have aligned portfolios for carbon reduction; others have not. Lease practices are changing with landlords seeking greater control over tenant behaviours. Valuers reported that whilst MEES consideration is embedded in due diligence processes, there is limited value impact.

Research limitations/implications

The study is limited by its small-scale and that the MEES regulations are not yet fully implemented. However, the research provides early findings and lays out recommendations for future research by identifying areas in which the regulations are/are not proving effective to date.

Practical implications

The findings will inform investors, consultants and policy makers.

Social implications

Achieving energy efficiency in buildings is critical to driving down carbon emission; it also has economic and social benefits through cost savings and reducing fuel poverty.

Originality/value

Believed to be the first post-implementation qualitative study of MEES.

Details

Journal of Property Investment & Finance, vol. 38 no. 5
Type: Research Article
ISSN: 1463-578X

Keywords

Article
Publication date: 5 September 2016

Peter Michl, David Lorenz, Thomas Lützkendorf and Sarah Sayce

The purpose of this paper is to report on the findings of a survey conducted by the Royal Institution of Chartered Surveyors (RICS) to discuss the extent to which qualified…

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Abstract

Purpose

The purpose of this paper is to report on the findings of a survey conducted by the Royal Institution of Chartered Surveyors (RICS) to discuss the extent to which qualified valuers have adapted their valuation practices in the light of guidance published by RICS in respect of sustainability and commercial property. The findings are placed within a wider debate between assessment of market value and investment value (worth).

Design/methodology/approach

The paper is a theoretical discussion incorporating the results from an empirical survey of valuation practitioners.

Findings

The paper reveals that guidance published by RICS in 2011 has achieved limited, but variable, impact in terms of impacting on valuation practice due to a combination of factors including lack of knowledge of the guidance, non-requirement of clients to request sustainability reporting within valuations, paucity of data. It found that where worth (investment value) is required, sustainability factors are more likely to impact the calculation than where an estimate of market value is prepared. The paper identifies theoretical problems and practical barriers hindering an integration of sustainability aspects into valuation practice.

Research limitations/implications

The empirical work was conducted prior to the embedding of guidance within the mandatory provisions of the “Red Book”; the study therefore reports on a direction of travel rather than the current position. The implications for research are the requirement to enhance data capture and to seek ways to break down the barriers to more comprehensive integration of such data so that worth and market values may begin to converge.

Practical implications

The paper has practical implications for both the education of valuers which is proposed through the RenoValue project discussed in the paper and for the RICS in monitoring progress towards more specific integration within valuers’ calculations. Further, the paper identifies that clients and lenders have a key role to play through the instructions given to valuers.

Social implications

There is now widespread recognition that properties which are not resource efficient and which are not equipped to flex to changing occupier needs may not currently be “future proofed” in investment value terms and are likely to see value erosion over time. Further, buildings have a key role in terms of climate change policy. Whilst new buildings can be mandated to meet improved efficiency standards, the ways in which buildings owners can be encouraged to upgrade will be important moving forward. One way is through a value chain response.

Originality/value

The survey is the most comprehensive investigation of valuer’s practice in relation to sustainability and the assessment of market value and worth undertaken. This provides a unique insight into the effectiveness of professional guidance and enables an informed discussion as to appropriate ways to enhance guidance moving forward.

Details

Journal of Property Investment & Finance, vol. 34 no. 6
Type: Research Article
ISSN: 1463-578X

Keywords

Abstract

Details

Journal of Property Investment & Finance, vol. 40 no. 4
Type: Research Article
ISSN: 1463-578X

Article
Publication date: 1 October 2002

Sarah Sayce and Owen Connellan

This paper debates the key concepts of fair value, value in use and existing use, as they relate to the valuation of owner‐occupied property assets. Changes to the professional…

1812

Abstract

This paper debates the key concepts of fair value, value in use and existing use, as they relate to the valuation of owner‐occupied property assets. Changes to the professional body regulatory and advisory frameworks (International Valuation Standards Committee (IVSC), the European Group of Valuers’ Association (TEGoVA) and the Royal Institution of Chartered Surveyors (RICS)) controlling the valuation of fixed assets for balance‐sheet have taken place. These, it argues, require valuers to re‐appraise the role of existing use value (EUV) as an acceptable valuation concept. The treatment of owner‐occupied property differs with the IVSC no longer recognising EUV, which it holds to be contrary to the principles of fair value, as enshrined within International Accounting Standards. Yet, the basis is still recognised by TEGoVA, which also espouses fair value, whereas the RICS prefer the value to the business model. The crux therefore lies in the interpretation of fair value. This paper argues for the abandonment of EUV in UK and European standards, to fall in line with International Standards. It is contended that, if market value or value in use is the only acceptable approach to accounting valuations, this will have implications for corporate entities and may give their advisers some practical problems. If EUV is abandoned, it also calls into question the appropriateness of DRC (depreciated replacement cost) as a valid surrogate of market value or EUV. The paper contends that fair value embraces both value in exchange and value in use. It argues that EUV fulfils little useful purpose and calls for its abandonment and for the development of an agreed methodology for establishing value in use. In the quest for this it suggests that there would be merit in re‐exploring the notion of going concern value, which was effectively written out of UK practice with the introduction of RICS guidance.

Details

Property Management, vol. 20 no. 4
Type: Research Article
ISSN: 0263-7472

Keywords

Content available
Article
Publication date: 1 October 2002

Sarah Sayce and Owen Connellan

465

Abstract

Details

Property Management, vol. 20 no. 4
Type: Research Article
ISSN: 0263-7472

Content available
698

Abstract

Details

Property Management, vol. 31 no. 3
Type: Research Article
ISSN: 0263-7472

1 – 10 of 32