Associate Professor, Maastricht University

Nils Kok

Nils Kok currently holds positions as visiting scholar at the Goldman School of Public Policy, UC Berkeley, and as associate professor in Finance and Real Estate at Maastricht University. He is the recipient of a prestigious three-year grant from the Dutch National Science Foundation for his work on energy efficiency and sustainability in the real estate sector. He also received awards from the United Nations Principles for Responsible Investment, Investment & Pensions Europe, the European Social Investment Forum, and the Aareal Bank/European Business School for his research.

Key lecture points from the Distinguished Sustainability Lecture Series

SingaporeMay 14, 2013

convened by Carrier

Abu DhabiBangkok

DubaiKuala Lumpur

MuscatQatar

RiyadhRio de Janeiro

São PauloSingapore

Nils Kok, Associate Professor, Maastricht University Singapore 2013

Buildings represent an important mechanism to save on resource consumption.

Here’s a couple of examples. Mandatory disclosure of energy efficiency through labeling. At this point if you construct new building in Singapore, larger than 2,000 square meters, it needs to have a Green Mark rating.

In the U.K., you can no longer lease out your building if it’s inefficient, by 2018.

We compared green building data to non-green building data, using 2007 and 2010 statistics. And what we found is that rents in green buildings are higher by about 3% on average.

The net income or the effective cash flows in a building are higher by about 7% for green buildings.

The transaction prices of green buildings are higher by about 13% on average both in 2007 and in 2010.

Does it matter whether you go for LEED® Silver, or Gold or Platinum? What we found is that yes, it does matter. If you go for Certified, there is no premium. The premium comes when you do more than just being LEED-Certified, once you go to LEED Silver or Gold. Around Platinum, the transaction increment basically flattens off.

If you make your buildings more efficient, your tenants are in fact compensating you for that energy efficiency in two ways: net rent that they pay and in picking your building over another building. That is not something that you can easily observe but it’s something that we can extract from our sample of 30,000 buildings.

National governments want to be located in green buildings, in the U.S. for example, the government only occupies LEED-Certified buildings. If a building is not LEED-Certified, the government will not rent that space.

Nils Kok, Associate Professor, Maastricht University Singapore 2013

We also look at transaction prices and we find that if you improve the energy efficiency of a building by a dollar per square foot, the transaction price actually goes up by $13. What that means is there’s a capitalization effect of energy efficiency.

Looking at data from the Netherlands, we found that there is green premium. If label D is the average and A sells for 10% more, well that is nice. But what’s more important, if you become less efficient, you get a discount. If your home is labeled G, you receive a 5% lower transaction price.

GRESB, the Global Real Estate Sustainability Benchmark, is an investor-led organization committed to assessing the sustainability performance of real estate portfolios (public, private and direct) around the globe.

GRESB collected data on about 450 companies and funds in the world. We ask, do you have green buildings in your portfolio, and how many relative to the total portfolio? What’s your energy consumption? And that’s a very revealing question because 50% of the companies that we collect data on have no idea about the energy consumption that they have, or the energy that they use.

At GRESB, we score all of those companies and then we classify them, looking at both policy as well as implementation.

Now we can start to classify companies into four quadrants. “Green starters” are about 40% of the companies that the GRESB survey covers. Ultimately, there are “green stars.” Those are companies that have both the organizational strategies and policies in place as well as the implementation. The idea is that the investors want to bring their investments in real estate from green starters to green talk all the way to green stars.