A new approach to property valuation that embraces their ethical worth
Few would question that the trend in the construction industry towards sustainable, socially desirable and environmentally friendlier methods is a ‘very good thing’ – even if new those methods and materials tend to be more expensive. The trouble is that until now there has been no widely accepted way of measuring the value they add. In the simplest of terms, if a new, sustainable approach requires greater investment and the returns on that investment are not measurable financially, its value as an asset is reduced.
That’s why global construction contractor ISG commissioned economics consultants from the Centre for Economics & Business Research (CEBR) to compile a comparative index of what they describe as ‘holistic potential property value’ through the UK. And the resulting report does indeed support the argument for a new valuation system.
For example, they found that buildings in the South of England tended to perform better than those in the North according to environmental and social metrics – but because they cost more to construct they come up poorly in the light of financial and commercial metrics.
The CEBR report points out that, ‘to be accurate and build resilience, our asset valuation system must be as flexible and multifaceted as the market’. With that in mind, ISG is proposing a new methodology that assesses the traditional financial and commercial metrics but considers them alongside environmental and social metrics such as energy supply, emission levels, users’ quality of life and local transport infrastructure among many others.
The importance of the issue would be hard to overstate – for the construction industry and for the country as a whole – because a new valuation methodology can help to identify where the opportunities are to ‘build differently and better, to add resilience to our communities and unlock skills and growth opportunities’.
ISG’s Global Chief Operating Officer Zoe Price commented, ‘The world has changed and so must our built environment, from homes to significant infrastructure. Inaction, or the sole pursuit of short-term gains, is no longer a viable commercial strategy, with ESG [environmental, social and governance] value now a necessity.’
Titled, Sustainable Buildings Monitor: Redefining value | Establishing a purpose-driven framework to measure the true value of property, the full report is published on ISG’s website: