The case for renting space in green buildings is improving for a variety of reasons. Not only is it safer for the environment but it is also better for a company’s bottom line.
It makes sense for businesses to operate in a cleaner world which holds benefits for generations to come. In fact, this week the MSCI South Africa Green Annual Property Index showed that the investment performance of certified green, prime and A-grade offices rebounded in 2021 from the hard lockdown of 2020, and out-performed non-certified assets of a similar quality by 170 basis points during the year. That’s pleasing for companies who have embraced being green.
The MSCI SA Green Annual Property Index is now in its six year, and its creators say it provides an independent and consistent comparative return on investment for green-certified and non-certified offices. It is released annually in conjunction with the Green Building Council of South Africa (GBCSA) and sponsored by Growthpoint Properties, SA’s largest property company.
The index provides an independent, globally consistent view on the investment performance of green-certified and non-certified offices. At the end of 2021, the index sample comprised 303 prime and A-grade office properties valued at R59.1bn of which 153 were green-certified buildings. These were compared to 150 non-certified offices of a similar quality.
“Once again, the MSCI index results reflect the business case for green-rated buildings. Not only are these buildings more efficient, reducing the cost of occupancy for tenants, but they also provide a healthier environment for occupants, which is particularly relevant as staff return to their offices. The fact that green buildings achieve better returns shows that tenants are recognising these benefits,” said Paul Kollenberg, Growthpoint’s Head of Asset Management: Office.
“Growthpoint is committed to retaining its status as one of the largest owners of sustainable properties and will continue to pursue appropriate certifications,” he said.
Green offices have actually been a star performer since the index’s inception, having outperformed other buildings by 19.1% since 2016.
For the year to-end December 2021, the green-certified office sample delivered a total return of 2.2%, 170 basis points above the non-certified sample’s return of 0.5%. This was a similar out-performance to that measured in 2020 and takes the cumulative total return of green-certified offices to 45.2% since the inception of the index six years ago.
Green certified offices enjoy a comparatively high income return despite a 29% higher capital value per square metre. This was achieved courtesy of a 30% higher net operating income per square metre compared with non-certified office buildings again reinforcing the importance blue chip occupiers are placing on green office accommodation, said GBCSA CEO, Lisa Reynolds.
“Since the first green star certified building in 2009, the Green Building Council of SA and those certifying their buildings, knew, almost instinctively, that it made business sense to certify green. We spoke then of the “Rands and Sense” of green buildings, with a lot of the business savvy couched within the lower utility bills, healthier buildings and highly productive occupants,’ she said.
Green certified offices achieved a lower per square metre usage of electricity, -11.6% and water, -20.7%, when compared with non-certified offices. With administered costs rising at rates in excess of inflation, these costs can have a significant effect on performance over the lifecycle of a property.