Investment performance gap between efficient and inefficient office assets widens

inefficient office assets

CBRE’s latest Sustainability Index report has revealed that energy-efficient assets outperformed inefficient ones all sectors in 2023. The office sector showed the largest investment performance gap between efficient and inefficient assets.

In 2023, inefficient commercial properties experienced a decline of -6 percent in capital value growth, whereas efficient assets saw a milder decrease of -3.8 percent.

In the office sector, efficient assets delivered total returns of -3.2 percent versus -6.5 percent for inefficient ones in 2023. Capital value growth for efficient offices was -6.6 percent compared to -10.6 percent for inefficient ones, while rental value growth was 4.1 percent for efficient assets and 3.2 percent for inefficient ones, indicating a widening performance gap.

Similarly, in the retail sector, energy-efficient assets boasted total returns of 3.1 percent in 2023, significantly higher than the 0.3 percent reported for inefficient ones.

In the industrial sector, energy-efficient assets yielded stronger investment returns in 2023, at 5.6 percent compared to 4.5 percent for inefficient ones. However, inefficient industrial
assets demonstrated higher rental growth at 6.6 percent compared to 5.6 percent for efficient assets during the same period.

The study underscores a link between the energy efficiency of commercial properties and their investment performance. Total returns for efficient assets were 0.8 percent compared to -1.0 percent for inefficient ones in 2023. Rental value growth stood at 3.9 percent for both efficient and inefficient properties during this period.

Jennet Siebrits, CBRE’s Head of UK Research, commented: “2023 saw interest rates plateau and capital value movements become less dramatic than in earlier years covered by the index. Yet inefficient offices saw a greater decline in capital values compared to more efficient offices, which is likely to reflect the impact of the capital expenditure needed to improve the energy efficiency and overall specification of secondary stock to a level that is acceptable to occupiers.”

Priva is a leading manufacturer of building energy management systems and digital cloud-based building automation technologies for carbon conscious businesses. To find out more about the role Priva’s technologies play in delivering more energy efficient building operation, please drop us a line.

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