Construction World October 2020

ENVIRONMENT & SUSTAINABILITY

CERTIFIED GREEN OFFICES HELD their value in tough rental market

In its fourth year, the MSCI South Africa Green Annual Property Index provides an independent and consistent comparative return on investment for green-certified and non-certified offices.

R eleased in conjunction with the Green Building Council South Africa (GBCSA) and sponsored by Growthpoint Properties, the MSCI South Africa Green Annual Property Index measures investment returns IRU D WRWDO RI SULPH DQG $ JUDGH RͦFHV (R54,5-bn capital value), and compares WKH UHWXUQV RI JUHHQ FHUWLͤHG EXLOGLQJV (R26,9-bn capital value) to the returns of the UHPDLQLQJ QRQ FHUWLͤHG FRQVWLWXHQWV For the year ended December 2019, the JUHHQ FHUWLͤHG RͦFH VDPSOH GHOLYHUHG D total return of 7,6% versus the 5,1% of the QRQ FHUWLͤHG VDPSOH ̸7KH ͤQGLQJV RI WKH 06&, *UHHQ 3URSHUW\ ,QGH[ IRU 2ͦFHV VWURQJO\ VXSSRUW *URZWKSRLQW̵V ORQJ WHUP RͦFH investment strategy,” says Paul Kollenberg, Growthpoint’s Head of Asset Management: 2ͦFH ̸:H EHOLHYH WKDW WKH GHVLJQ DQG operation of buildings with a focus on occupant health and wellbeing will come into even sharper focus, and the index is proof that green buildings that prioritise health factors such as good ventilation and air quality are extremely well-positioned to retain and attract tenants now and in the future,” he adds. What drove the outperformance RI JUHHQ FHUWL̨HG R̪FHV" Capital growth was the main driver of this RXWSHUIRUPDQFH DV WKH JUHHQ FHUWLͤHG sample held its value in a challenging RSHUDWLQJ HQYLURQPHQW IRU WKH RͦFH PDUNHW :KLOH WKH JUHHQ FHUWLͤHG VDPSOH GHOLYHUHG D FDSLWDO JURZWK RI WKH QRQ FHUWLͤHG sample saw capital growth slow to -3,3%. The superior capital growth was the result of a better net income growth and a lower discount rate – meaning that valuers YLHZ JUHHQ FHUWLͤHG RͦFH SURSHUWLHV DV

a lower risk investment. Also telling was D VLJQLͤFDQWO\ ORZHU YDFDQF\ UDWH RI versus the non-green sample vacancy rate of 11,5% highlighting the value occupiers DUH DWWDFKLQJ WR JUHHQ FHUWLͤHG SUHPLVHV The meaning behind these results Released by MSCI in June 2020, the index results reinforced the association between TXDOLW\ DQG JUHHQ FHUWLͤHG EXLOGLQJV DV UHͥHFWHG E\ D KLJKHU FDSLWDO YDOXH SHU square metre, more resilient capital growth and a higher net operating income per VTXDUH PHWUH FRPSDUHG WR WKH QRQ FHUWLͤHG RͦFH EXLOGLQJV “The latest SA Green Property Index results add to the growing body RI HYLGHQFH UHJDUGLQJ WKH EHQHͤWV of sustainable investing. It has been HQFRXUDJLQJ WR VHH KRZ JUHHQ FHUWLͤHG buildings have outperformed on the key investment metrics of occupancy, net operating income and operating cost ratios, highlighting these asset’s defensiveness during tough times. Furthermore, it has been interesting to note the discount and cap rate spreads between JUHHQ FHUWLͤHG DQG QRQ FHUWLͤHG DVVHWV perhaps showing that valuers are adjusting their relative long-term risk assumptions IRU JUHHQ FHUWLͤHG EXLOGLQJV̹ VD\V (LOHHQ Andrew, Vice President: Client Coverage at MSCI South Africa. Findings from the analysis showed that capital expenditure stood at 0,7% of WKH FDSLWDO YDOXH IRU *UHHQ 6WDU FHUWLͤHG buildings, versus 1,2% of the capital value IRU XQFHUWLͤHG EXLOGLQJV 7KLV PHDQV WKDW JUHHQ FHUWLͤHG EXLOGLQJV UHTXLUHG comparatively less capital expenditure,

which has enhanced its capital growth relative to the non-green sample. “It is encouraging to see that yet again, the researched evidence shows that FHUWLͤHG JUHHQ EXLOGLQJV DUH D ZRUWKZKLOH investment. We expect that the value RI FHUWLͤHG JUHHQ EXLOGLQJV ZLOO EHFRPH even more pronounced as we navigate through the current challenges presented by COVID-19. With the greater focus on healthier environments, green buildings become even more attractive as they have always concentrated on health as wellbeing of tenants, as well as operating FRVW HͦFLHQFLHV̹ VD\V *HRUJLQD 6PLW GBCSA Head of Technical. She adds that the GBCSA has initiated globally leading LQGHSHQGHQW UHVHDUFK RQ WKH ͤQDQFLDO impacts of green buildings. The results from this year’s MSCI Green Property Index DUH SDUWLFXODUO\ VLJQLͤFDQW IURP D FDSLWDO investment perspective, given the COVID-19 related impact on the property sector. Growthpoint is invested in real estate and communities across South Africa and internationally and is an established leader in commercial green developments. Growthpoint provides spaces that work best for its clients by owning and managing the biggest portfolio of green- FHUWLͤHG EXLOGLQJV LQ $IULFD DQG WKH UHVXOWV of the MSCI Green Property Index for 2ͦFHV GHPRQVWUDWH WKH UHDO UHZDUGV RI doing this. “Growthpoint creates space to thrive with innovative and sustainable property VROXWLRQV LQ RXU SRUWIROLR RI KLJKO\ HͦFLHQW RͦFH EXLOGLQJV ZKLFK VXSSRUW D ORZHU FRVW of occupancy for clients, a lighter impact on the environment and rewarding returns for investors,” concludes Kollenberg. ƒ

In a nutshell: &RPSDULVRQ RI *UHHQ 6WDU &HUWLͤHG %XLOGLQJV YV 1RQ &HUWLͤHG %XLOGLQJV

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Total Return

7,6% -0,8% 8,0%

5,1% -3,3% 11,5%

Capital Growth

Vacancy

Capital expenditure vs Capital value

0,7%

1,2%

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