Certified green offices: Resilient to 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.

Released in conjunction with Green Building Council South Africa (GBCSA) and sponsored by Growthpoint Properties, the MSCI South Africa Green Annual Property Index measures investment returns for a total of 293 prime and A-grade offices (R54.5 billion capital value) and compares the returns of 105 green-certified buildings (R26.9 billion capital value) to the returns of the remaining 188 non-certified constituents.

For the year ended December 2019, the green-certified office sample delivered a total return of 7.6% versus 5.1% of the non-certified sample.

CERTIFIED · NON-CERTIFIED

TOTAL RETURN · 7.6% · 5.1%

CAPITAL GROWTH · -0.8% · -3.3%

VACANCY · 8.0% · 11.5%

CAPITAL EXPENDITURE vs CAPITAL VALUE · 0.7% · 1.2%

Growthpoint’s Head of Asset Management Office, Paul Kollenberg, explains that the findings of the MSCI Green Property Index for Offices strongly support their long-term office investment strategy.

GROWING GREEN

Capital growth was the main driver of this outperformance as the green-certified sample held its value in a challenging operating environment for the office market. While the green-certified sample delivered capital growth of -0.8% the non-certified sample saw capital growth slow to -3.3%.

The superior capital growth was the result of better net income growth and a lower discount rate – meaning that valuers view green-certified office properties as a lower risk investment. Also telling was a significantly lower vacancy rate of 8.0% versus the non-green sample vacancy rate of 11.5% highlighting the value occupiers attach to green-certified premises.

RESULTS RENEW REASON

Released by MSCI in June 2020, the index results reinforce the association between quality and green-certified buildings, as reflected by a 34% higher capital value per square metre, more resilient capital growth, and a higher net operating income per square metre compared to the non-certified office buildings.

Vice President of Client Coverage at MSCI South Africa, Eileen Andrew, explains that the latest SA Green Property Index results have added to the growing body of evidence regarding the benefits of sustainable investing.

Findings from the analysis showed that capital expenditure stood at 0.7% of the capital value for Green Star certified buildings, versus 1.2% of the capital value for uncertified buildings. This means that green-certified buildings require comparatively less capital expenditure, which has enhanced the capital growth relative to the non-green sample.

GBCSA Head of Technical, Georgina Smit, comments that it is encouraging to see the research and evidence that backs certified green buildings as a worthy investment.

Smit adds that GBCSA has initiated globally leading independent research on the financial impacts of green buildings. The results from this year’s MSCI Green Property Index are particularly significant from a capital investment perspective, given the Covid-19 related impact on the property sector.

Growthpoint is an established leader in commercial green developments across South Africa and internationally. The company provides spaces that work best for its clients by owning and managing the biggest portfolio of green-certified buildings in Africa and the results of the MSCI Green Property Index for Offices demonstrate the real rewards of doing this.

Green buildings have the unique potential to positively restore, regenerate, improve, revitalise, include, enhance, advance and empower occupants, communities and the environment. We have a duty to maximise these impacts.

READ +IMPACT 0.3 |Discover how sustainable strategy was brought to life in the development of Exxaro situated at the Growthpoint’s office development in Centurion. +Impact magazine is published by GreenEconomy.Media