The valuation of sustainable freehold property: a CRE perspective

In the increasingly hostile operating environment, corporate real estate (CRE) executives are beginning to recognise the importance of sustainability within their freehold property portfolios. To assist in decision‐making, external valuations are regularly commissioned. The purpose of this paper is to examine the practical difficulties associated with incorporating sustainability criteria in the valuation methodology as valuation outcomes inform CRE decision‐making at strategic and tactical levels.

This paper takes the form of a detailed and critical literature review.

It is widely acknowledged that sustainability has become a key driver of many business decisions. Corporate entities can achieve a considerable range of tangible and intangible benefits from sustainable real estate in their freehold portfolios. While substantial progress has been made toward understanding the dynamics of the sustainable real estate market, the valuation of such assets is rather hampered by the comparative difficulties in achieving consensus regarding the sustainable criteria and how they should be objectively assessed.

The paper contributes to the broader appreciation of the theoretical and practical difficulties associated with identifying and assessing appropriate sustainable criteria. Importantly, the paper highlights the need for greater understanding of the criteria in the evolving valuation methodology framework.