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Thought Leaders

 
 

I denna bloggen kan du följa våra Thought Leaders. Det är medarbetare som var och en ligger i framkant inom sitt kompetensområde och som gärna delar med sig av sin kunskap.

 
 

Sweden, the spoiled child on the property market

April 15, 2016
 

Many international investors active in the Swedish market have stressed sustainability as a significant parameter in their investment criteria. For this, and many other reasons, Sweden is a very good market to be in right now. For many years, the harsh climate has already forced property owners into energy saving awareness and the general green quality of buildings is already higher than average compared to its European counterparts. In fact, the majority of all new constructed buildings have such good sustainability criteria from having met the building codes, that many contractors choose to apply the internationally accepted classification systems to all of their production. However, the Swedish investors do not see sustainability as a primary concern. In terms of sustainability, one could argue that Sweden is a spoiled child unaware of the value of its primary green assets.

 

The commonly accepted theory is that tenants generate the demand for green buildings; consumers which prefer to eat ecological food would also prefer to work in an environmentally friendly building.  Whether a person gets the chance to work in a green building relies more on what company they work for and that companies environmental policy and consequentially what type of employees a company has the potential to hire.  From our discussions with property owners have we found that they have difficulty raising leasing rates after a building has received some type of green certification.  One explanation could be that existing leasing rates are set by long leasing arrangements that cannot be renegotiated directly after a building has received a green classification.  That would explain why those investors that emphasise the short-term are less interested in green certification than pension funds that operate on both a long-term perspective and ethical guidelines.  It can also be possible that tenants are poorly informed on the various certification systems to be able to set demands for their property owner.

 

How does sustainable design affect a properties worth?  The Swedish Evaluators shrug their shoulders. How can one measure the effect?  There have been relatively few sales of green buildings in Sweden, so statistics are lacking.  And as long as there do not exist two comparable houses standing beside each other, one with and one without green classification, it is difficult to accurately measure the green effect on a transaction.

 

Examining the Swedish stockpile of green buildings one can actually find explanations as to why the green effect is not perceivable.  Many contractors have the ambition to be leaders in the building of green classed buildings without regard to the area they build in.  Since there exists few unbuilt sites in the city centers many green buildings are built away from public transport, where it is not as easy to attract tenants with ambitions of sustainability.  Thus leading to the inability to reasonably compare property values or leasing rates.

 

The type of building use is also important for the green effect.  Multi-tenant shopping centers are especially complex with regards to sustainability.  The majority of such leases leaves the majority of the building maintenance as the responsibility of the tenant, which reduces the incentive for the property owner to value sustainability with regards to maintenance and energy consumption.  Many shopping centers, even the green, are constructed on the outskirts of cities where the majority of customers will arrive by car.  To attract customers the product assortment needs to be a mix of “sustainable stores” and electronics chains that will maximize their display of TV’s without regard to energy efficiency.  No one takes their bicycle to purchase a new TV…

 

As long as green buildings are being built where the demand for such is low will the effect on both property values and leasing rates be hard to discern.  Studies show that the green effect is most prominent outside major centers but with access to public transportation where they can be reached by tenant interested in sustainability.  No such effect can be measured where location is the prioritized by tenants.  Outside of cities the lack of public transportation provides the same negative effect.  That leads to a dilution that weakens the statistics for green buildings in the Swedish market.  To correctly measure the green effect one should first study buildings built in the right place.  Looking to the future, the international investors and their desire for sustainability should not be ignored.  In 2015 international investor stood for nearly half of the transaction volume in Sweden. There is still time for bargain hunters before the Swedish market learn how to correctly value their green assets.

 

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