Sustainability evolution in the Australian property market. Examining valuers’ comprehension, knowledge and value
| Pages | 578-601 |
| Date | 05 September 2016 |
| Published date | 05 September 2016 |
| DOI | https://doi.org/10.1108/JPIF-04-2016-0025 |
| Author | Georgia Warren-Myers |
| Subject Matter | Property management & built environment,Real estate & property,Property valuation & finance |
Sustainability evolution
in the Australian
property market
Examining valuers’comprehension,
knowledge and value
Georgia Warren-Myers
Faculty of Architecture, Building and Planning,
The University of Melbourne, Melbourne, Australia
Abstract
Purpose –The relationship between sustainability and value in property has been a major area of
investigation over the past decade. However, in spite of the extant literature and research, the
connections made by valuers in practice of the value relationship are still unresolved. The purpose of
this paper is to investigate, in the Australian context, valuers’perception of the relationship between
sustainability and value; and their experience and knowledge of sustainability in valuation practice.
Design/methodology/approach –The research investigates valuers’perception and knowledge
of sustainability and its inclusion in valuation practice in Australia. The approach uses a longitudinal
survey of valuers from 2007 to 2015 tracking valuers’knowledge, understanding, inclusion of
sustainabilityreporting and the perceptionsof the relationship between sustainability and marketvalue.
Findings –This paper presents findings from a longitudinal survey that has been conducted in
Australia since 2007, identifying changes between 2007, the height of the property market and
sustainability engagement prior to the global financial crisis, and the subsequent years to 2015. The
growth ofsustainability in the propertymarket is significant, however,valuers’knowledge and reporting
on sustainability is not demonstrating the same level of development. As a result, this is inhibiting
valuers reporting on sustainability and has implications for practice andtreatment of market values.
Practical implications –This research highlightsthe need to examine how to assist valuers to more
rapidly develop knowledge and experience to reflect the implications of change in practice. Current
approaches being developed in the UK and Europe, like the introduction of RenoValue professional
development programsand guidance documents, to assist valuers to develop their knowledge needs to
be implemented inthe Australian environment as currentapproaches are inadequate, andsteps need to
be taken in order to assist theirdevelopment of knowledge and experienceas the market demonstrates
growth andacceptance of sustainability.This research identifies the needto re-examine how professional
developmentis undertaken and knowledge developedby those practicing in the profession in Australia.
Originality/value –This longitudinal survey is the only research that has spanned a substantial
period of time attempting to ascertain valuers’perception of the relationship between sustainability
and value; and attempts to track the knowledge development of valuers in the context of sustainability.
The findings identify how the market is developing and adhering to a product model development
theory, however, also identifies more fundamental issues and implications for valuation praxis, in the
development of knowledge and ability of valuers to adapt to change and reflect these valuations.
Keywords Australia, Sustainability, Heuristics, Valuation, Commercial property,
Knowledge development
Paper type Research paper
Introduction
Broadscale sustainability investment and implementation in the Australian built
environment has had varied uptake as a result of limited evidence to suggest
sustainability has a positive impact on value. However, increasing issues related to
Journal of Property Investment &
Finance
Vol. 34 No. 6, 2016
pp. 578-601
©Emerald Group Publishing Limited
1463-578X
DOI 10.1108/JPIF-04-2016-0025
Received 25 April 2016
Accepted 29 May 2016
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/1463-578X.htm
578
JPIF
34,6
climate change and the ability of the property sector to mitigate and adapt is
reinvigorating the discussion in relation to sustainability. There are incremental steps
towards increasing levels of sustainability in the built environment; however, the lack
of a clear relationship between sustainability and value has seen limited investment
and development of sustainability beyond measures that can be easily paid back, like
energy efficiency initiatives. This is evident in the number of Green Star rated office
buildings comprising 18 per cent of total office, compared to the energy efficiency
rating which has rated up to 72 per cent of buildings in Australia (Green Building
Council of Australia, 2013a; NABERS, 2016a). Warren-Myers (2009) found evidence to
suggest sustainability in the built environment has similarities in evolutionary
development to McColl-Kennedy et al. (1992) and McColl-Kennedy and Kiel (2000)
product evolution model. Subsequent research (Warren-Myers 2012a, 2013) found that
a key issue in sustainability implementation was the lack of a clear relationship
between sustainability and value that was inhibited by valuer knowledge in
the valuation profession. Recent changes and adoption of mandatory reporting
within the commercial sector in regards to energy efficiency has seen a significant
change in the uptake and rating of commercial properties in Australia. Consequently,
this research investigates whether valuers in the industry are more knowledgeable of
sustainability as a result of market maturation of sustainability and mandato ry rating
systems; and whether this has any implications for the relationship with value. This
research presents the findings of a longitudinal research project, which has explored
valuers’knowledge, level of knowledge of sustainability and rating systems, and value
relationships in property in Australia. This paper specifically focusses on the
change between 2007 and 2015, examining changes in valuers’perception of value
relationships and knowledge. In addition, it examines the differences between 2011 and
2015 as the introduction of mandatory ratings for commercial property Australia wide
came into play. Investigating whether this has had any role in developing property
professionals’and valuers’knowledge of sustainability and rating systems and
whether this has enhanced perceptions of a relationship between sustainability
and value.
Background –sustainability, value and valuers
The question relating to what is the quantum of relationship between sustainability
and market value has been the primary focus of many academics, industry and valuers
alike over the last decade. Much of this research has explored the value premiums
related to prices and rentals as a result of sustainability ratings. The majority found
positive results indicating a rental and price premium is achieved in relation to a
sustainability rating (Miller et al., 2008; Eichholtz et al., 2010; Pivo and Fisher, 2010;
Newell and MacFarlane, 2011; Fuerst and McAllister, 2011; Reichardt et al., 2012),
whilst some argue there is no premium (Gabe and Rehm, 2014). However, clarity is still
being sought whether valuers are considering sustainability as a factor that influences
values (Ciora et al., 2016). Warren-Myers (2009, 2013) found evidence to suggest valuers
did make a connection, ascertaining a relationship between sustainability and market
value, however, this was severely inhibited by their limited knowledge surrounding
sustainability (2013). This has resulted in limited dis cussion or inclusion of
consideration of sustainability in valuations.
The role of a valuer is to conduct an assessment to ascertain the market value of an
asset, it is not their position to tell the market what it should pay, but reflect the value
579
Sustainability
evolution
To continue reading
Request your trial