Valuers’ perception of sustainability in the UK commercial property market

The thesis examines UK commercial property valuers’ perception of sustainability and how they are reflecting it while valuing commercial properties, especially offices and retail. The demand for sustainability in commercial properties have been reportedly increasing. Along with the increasing demand, governments around the world are taking measures to address climate change by reducing carbon emission. As part of such measure the UK government has a commitment to decrease its carbon emission to zero compared to its 1990 level by 2050. To achieve this target legislative policies are being added that will reduce carbon emission from the built environment. To address these changes, the Royal Institution of Chartered Surveyors (RICS) has published several standards and guidance notes to guide valuers in this respect. However, research has been slim to identify the extent to which valuers are incorporating these changes to their due diligence practices. The objective of this thesis is to determine how commercial property valuers in the UK are adopting their practices to address the increasing demand for sustainability in the built environment, legislative changes and regulative pressure to address climate change as well as the physical risk of it. To answer these questions, a mixed method approach was undertaken. An online survey and semi-structured interviews were completed to address the research questions. The online survey has revealed reference to RICS standards and guidance on sustainability had improved since previous research reported by Michl, Lorenz, Lutzkendorf and Sayce (2016) in their pap er titled “Reflecting sustainability in property valuation-a progress report” which reported on the findings of a survey conducted by the RICS in 2012. However, this research found progress on data collection is still limited though have improved. Additionally, valuers indicated that sustainability attributes were of more importance to owner occupiers than investors and lenders. In terms of how sustainability attributes were affecting market value and investment value, valuers indicated that only certification was influencing it to some extent. Other attributes related to energy and carbon, waste and water management, health and well-being were not seen to be having much impact on value. It was also revealed experienced valuers are more knowledgeable in sustainability and collects more data. Furthermore, possibilities were discovered that some variables such as type of organisation, size of organization and purpose of valuation could have influence on sustainability consideration. These possibilities were further explored through the second phase, the semi structured interviews. The semi-structured interviews revealed though data collection on sustainability has improved since the last research, practice as well as awareness of sustainability among valuers can be inconsistent. Value impacts of sustainability factors are mostly limited to implicit considerations ii through rent and all-risks yield. Some explicit considerations were reported to address EPC upgrade costs or remediations for flood or contamination. Among three commissioning clients, lenders were mentioned as the pioneers to bring in some changes to instructions to valuers. legislation such as MEES has made a real impact, whereas regulative pressure from the RICS has not been very effective. Experienced valuers reported collecting more data on sustainability and were found more knowledgeable about climate change and sustainability. local settings, purposes of valuation and size of organization are some of the other factors that may impact on sustainability consideration. Several barriers were also revealed because of which it might be hard for valuers to incorporate sustainability in valuation which include lack of data, education and training, traditional methodology, time, cost, fee, client’s pressure and reliance on third party data