Environmentally Sustainable Development (ESD) is a term that has been around for years, so it’s no wonder that the issue of valuing its benefit to a building development is now topical.

And the issue is made even more vexed by the absence of definitive government legislation, even though government tenants themselves are key drivers in the push for greener buildings by prescribing a minimum of 4.5 stars under the Australian Building Greenhouse Rating.

According to many industry experts, the additional cost of ESD in buildings is simply unjustified in direct benefit terms. This view is particularly relevant when you consider today’s relatively low costs of utility services like water and power, even though logic points to much higher costs in the future. Time will tell, but that doesn’t make it easier to carry out a valuation of the benefits of green infrastructure in a building to which the costs of development are still being applied in today’s terms.

The record low vacancy levels in many Australian office markets has had its own effect. There simply hasn’t been enough competition amongst owners and developers (with some notable exceptions) for ESD to be seen as a valuable differentiator. In a building market where the overwhelming amount of stock is of an era when green was not much more than a colour option, the issue of ESD has been somebody else’s problem.

But the times are definitely changing. The concept of “intangible benefit” has been introduced and apparently accepted by this cynical industry of ours, and the facts are, like it or not, new building works have and will continue to feature, a host of green features.

This is the case, even though we still have difficulty in assessing a direct value link here in Australia, probably due to our comparatively small number of ESD-enabled buildings thus far, although overseas studies are now pointing to higher values based on much larger and more mature samples.

And with most higher educational institutions now teaching a range of green inspired subjects, we can be sure that our future building and property professionals will continue and accelerate the ESD features in our buildings, with or without accurate valuations in conventional terms.

So, what is the right approach? We see “valuing green” as an emerging factor in the valuation equation. However measuring the impact of the “intangible benefit can only be through observation of the market and careful analysis of market transactions, both sales and leasing.”