Green building and environmental assessment are becoming an integral part of the modern real estate market. The impact of environmental factors on the value of real estate and rental rates is becoming more and more noticeable both in Russia and in other countries. This is due to the increasing focus on sustainable development, as well as changing preferences of investors and tenants, who increasingly prefer facilities with a lower environmental impact.
In recent years, sustainability and environmental standards have become increasingly important in various industries, including real estate. Green building and environmental, social and governance (ESG) assessment of buildings play a key role in determining property values. In this article, we will look at how these factors affect the value of residential and non-residential real estate, as well as rental rates, citing examples from Russia and other countries.
Green building factors
- Energy efficiency. Buildings designed to minimize energy consumption can significantly reduce operating costs. The use of solar panels, heat recovery systems and energy-efficient windows helps reduce energy bills. In Russia, where climatic conditions require significant heating costs, such solutions are especially relevant.
- Environmentally friendly materials. The use of materials with low emissions of carbon dioxide and toxic substances improves the quality of indoor air and increases the environmental reputation of the building. In Moscow, developers are increasingly using locally produced materials, reducing the carbon footprint of transportation.
- Water conservation. The installation of rainwater collection systems and the use of water-saving plumbing helps to reduce water consumption, which is important in regions with limited water resources. In Russian megacities, such technologies are becoming the standard for new residential complexes.
- Sustainable location. Buildings close to public transport and infrastructure for cyclists reduce reliance on cars, resulting in less carbon dioxide emissions. In Moscow, the development of bicycle infrastructure and the improvement of public transport contribute to the growing popularity of such facilities.
Impact of ESG factors on real estate value
ESG (Environmental, Social and Governance) factors also play an important role in shaping property values. Environmental factors include energy efficiency and reduced carbon emissions. Social factors relate to the health and safety of residents, as well as social inclusion. Management factors are related to transparency and ethical standards of real estate management. The influence of these factors is especially noticeable in the residential and non-residential real estate markets in Europe. For example, in Germany, buildings that meet high environmental standards may have a cost 5-10% higher than the market average.
- Residential real estate. In cities with high levels of air pollution, the presence of air purification systems and green areas can significantly increase the attractiveness of residential complexes. In Moscow, projects such as Zilart and Skolkovo offer housing with an improved environmental environment, increasing their cost by 5-10% compared to counterparts without such solutions.
- Non-residential real estate. LEED or BREEAM certified office buildings often attract more prestigious tenants willing to pay rental rates above average market. In Moscow, class A business centers are actively introducing green technologies, which allows them to maintain high rental rates.
Examples from Russia
- Moscow. The Zilart project is one of the largest examples of green construction in the capital. As well as housing, it includes extensive parkland, making it attractive to families with children. The use of energy-efficient technologies reduces operating costs for residents.
- St. Petersburg. The Baltic Pearl project uses modern environmental solutions, including wastewater treatment systems and the use of renewable energy sources. This makes the project attractive to both homebuyers and commercial tenants.
- Kazan. Projects using green technologies are actively developing in Kazan. For example, the residential complex “Sunny City” includes solar heating systems and energy-efficient lighting of public areas.
These projects confirm that interest in green construction is gradually growing in Russia. Despite the departure of international certification systems, new initiatives and standards are emerging that are aimed at developing sustainable construction. So GOST R, developed by the Technical Committee 366 (TC 366), is aimed at creating national standards for sustainable and environmentally friendly construction in Russia. This standard takes into account the specifics of Russian climatic conditions and construction practices, and integrates the world’s best practices in the field of green construction.
Main aspects of GOST R
- Energy efficiency. Establishing requirements to reduce energy consumption of buildings through the use of energy-efficient technologies and materials.
- Use of renewable energy. Encouraging the adoption of systems using solar, wind and other renewable energy sources.
- Management of resources and waste. Introduction of standards for reducing the use of resources and effective management of construction and household waste.
- Quality of the internal environment. Providing comfortable living and working conditions by improving ventilation, lighting and acoustics.
- Environmentally friendly materials. Recommendations for the use of local and environmentally friendly building materials.
GOST R helps developers and builders navigate the requirements for green buildings, contributes to increased environmental responsibility and sustainable development of the construction industry in Russia.
Another important aspect in the valuation of real estate is the consideration of the cost of the building life cycle. This approach involves analyzing all costs over the life of the building, including construction, operation and disposal. Buildings with low operating costs and less environmental impact become more attractive to investors and owners.
Predicting the future, we can expect an increase in the influence of environmental factors on the real estate market. Old buildings without modern environmental characteristics will lose value compared to new facilities built with sustainable development principles in mind. This is due to both tougher environmental regulations and changing consumer preferences, which are increasingly choosing more environmentally friendly options for life and work.
Thus, green construction and environmental assessment become important elements of the real estate market, having a significant impact on the value of objects and rental rates. The development of national standards and accounting for the cost of the life cycle of buildings open up new prospects for the sustainable development of the industry in Russia and beyond.
By Kirill Kulakov, Dr. Econ. Sciences, President of SRO Regional Association of Appraisers, Professor of NRU MSСU, and Denis Podshivalenko, Cand. Econ. Sciences, appraiser of green buildings and business, LLC “Greenexpertiza”