The latest MSCI South Africa Green Annual Property Index continues to support the investment case for green buildings in the commercial property sector. The index showed that the investment performance of certified green, Prime, and A-grade offices improved in 2021 and outperformed non-certified assets of a similar quality by 170bps during the year.
Now in its sixth year, the MSCI SA Green Annual Property Index provides an independent and consistent comparative return on investment for green-certified and non-certified offices. Released annually in conjunction with the Green Building Council South Africa (GBCSA) and sponsored by Growthpoint Properties, the index provides an independent, globally consistent view on the investment performance of green-certified and non-certified offices.
At the end of 2021, the index sample comprised 303 prime and A-grade office properties valued at R59.1-billion of which 153 were green-certified buildings. These were compared to 150 non-certified offices of a similar quality.
“Once again, the MSCI index results reflect the business case for green-rated buildings. Not only are these buildings more efficient, reducing the cost of occupancy for tenants, but they also provide a healthier environment for occupants, which is particularly relevant as staff return to their offices. The fact that green buildings achieve better returns shows that tenants are recognising these benefits. Growthpoint is committed to retaining its status as one of the largest owners of sustainable properties and will continue to pursue appropriate certifications,” says Paul Kollenberg, Growthpoint’s Head of Asset Management: Office.
Green offices outperformed by 19.1% since 2016
For the year ended December 2021, the green-certified office sample delivered a total return of 2.2%, 170bps above the non-certified sample’s return of 0.5%. This was a similar outperformance to that measured in 2020 and takes the cumulative total return of green-certified offices to 45.2% since the inception of the index six years ago. Over this period, green certified offices outperformed the non certified sample by 19.1% – an annualised outperformance of 260bps.
A key reason behind the strong performance of green certified offices is its comparatively high income return despite a 29% higher capital value per square metre. This was achieved courtesy of a 30% higher net operating income (NOI) per square meter compared to non-certified office buildings again reinforcing the importance blue chip occupiers are placing on green office accommodation.
“Since the first green star certified building in 2009, the Green Building Council SA and those certifying their buildings, knew – almost instinctively – that it made business sense to certify green. We spoke then of the “Rands and Sense” of green buildings, with a lot of the business savvy couched within the lower utility bills, healthier buildings and highly productive occupants. The last six years’ worth of the MSCI SA Green Property Index results has moved the conversation to that of NOI and Capital Value. The conversation is not only about bottom line savings, but about investment – “Rands and Sense” to Value of Green,” says GBCSA CEO, Lisa Reynolds.
Cashflows deemed lower risk
Green certified offices boasted significantly lower per square meter usage of electricity (-11.6%) and water (-20.7%) when compared to non-certified offices. With administered costs rising at rates in excess of inflation, these costs can have a significant impact on performance over the lifecycle of a property. As a result, the green-certified office sample had a 50bp lower discount rate when compared to the non-certified sample, implying that its future cashflows were deemed lower risk.
Better across all measures
Released in April 2022, the MSCI South Africa Green Annual Property Index demonstrated the link between green-certified buildings and investment performance but also of its lower vacancy rate, lower operating cost, higher net operating income and lower discount rate.
“In an extremely tough office market, it is encouraging to see that green certified buildings continue to outperform non-certified buildings. Not just because the perceived risk in the income stream is lower but is also underpinned by better property fundamentals – vacancies are lower and margins are higher. Certification provides a proven tool for asset managers to leverage off giving investors an enhanced return,” says Eileen Andrew, Vice President: Client Coverage at MSCI South Africa.
Comparison of Green Star Certified Buildings vs Non-Certified Buildings in 2021
GBCSA has moved to new green offices in Cape Town at Growthpoint Properties’ River Park, Mowbray. The GBCSA has taken a three-year lease over some 330sqm of space at the recently refurbished multitenant office building.
River Park recently improved its green rating to a GBCSA 5-Star Green Star SA – Existing Building Performance v1 certification. The building has high scores for its land use and ecology, green transport access, and energy and water savings. Lisa Reynolds, CEO of GBCSA, says a green building rating was a prerequisite for the council’s choice of offices,
but it also had several other rigorous requirements. On top of walking the talk by working from a certified green building, cost-effectiveness was key. The GBCSA also sought an inspiring workspace in a good location with excellent accessibility for visitors. The office is near GBCSA’s former offices so staff travel would not be affected by the move and, thus, did not increase their carbon footprint.
To assist its clients to comply with the new EPC requirements, leading consulting engineering and infrastructure advisory firm Zutari is offering its experience in this regard, says Yovka Raytcheva Schaap, Associate, Environmentally Sustainable Design (ESD) Consulting & Project Management. Zutari offers both upstream and downstream assistance with the EPC process.
WINNER OF 35TH COROBRIK STUDENT ARCHITECTURE AWARDS
The winner of the 2021 Corobrik Student Architecture Awards was announced on 8 June at a special event at the Radisson RED in Rosebank, Johannesburg. The 35th national awards ceremony was unique in that all seven regional winners and the heads of school from their respective universities, together with leaders from the architectural fraternity, were in attendance in person for the first time since the Covid-19 pandemic.
The 2021 national winner, announced live, was Mpho Sephelane from the School of Architecture at the University of Cape Town, who received a R70 000 cash prize. A special prize for the best use of clay face brick in a project was awarded to Wian Jordaan from the Department of Architecture at the University of Pretoria. An overwhelming four of the seven regional winners used face brick in their projects, including Sephelane.
The seven regional winners presented their theses to an esteemed panel of judges in a Johannesburg studio during May, from where the final winner was selected. The judges were Ludwig Hansen from Ludwig Hansen Architects + Urban Designers, Rahdia Parker from Archi Cape Town, and Adwoa Agyei, Director: Physical Development Services at the City of Tshwane.
“I can only agree with the sentiment that we as judges were impressed by the quality of the submissions. There are actually seven winners here. It has been an honour from our side to be part of the awards,” said Hansen.