RICS will soon release an update of global real estate valuation standards, the so-called Red Book. The draft version, now available for public consultation, highlights the increasing importance of sustainability. For the first time, sustainability will be defined and professionals will be strongly advised to collect and record sustainability data. This could be an important step in structurally connecting sustainability and finance. Stopping short of making such analysis obligatory, it does represent an enhanced standard for good practice. This update highlights the link between valuation and energy efficiency, determining substantial outgoing, running cost and the level of recovery from the occupier as factors that are important to include in valuation assessments.
“The Red Book has a global reach and so, in making standards mandatory, the RICS must balance the aspirations to drive forward the inclusion of sustainability considerations with what is practical across all regions, including some areas where market are less sensitised that Western Europe. But the Board are delighted with this new iteration and are revising the accompanying guidance to further assist in making markets more transparent in connection with sustainability!”
Sarah Sayce, Current member of the RICS Global Valuation Professional Board
The RICS standards are used by investors, mortgage lenders, portfolio managers and the public sector across the world to make valuations consistent.
Rolf Bastiaanssen, REVALUE project coordinator, welcomes these changes. “In several markets we can see that investors and lenders are becoming more sensitive to this issue, with evidence of both green premiums and brown discounts in pricing. For commercial investors, this tendency is typically linked to an expectation of future change of standards in quality, either through investor preferences, or through possible energy efficiency standards and regulations. For public sector bodies and owner-occupiers, sustainability is becoming a decision-making factor and “the right thing to do”. We welcome that RICS acknowledges these trends and strengthens the role of sustainability in its standards. Moreover, these changes in the standards may further increase the visibility of sustainability in valuation reports, something that may help to accelerate the process. We are looking forward to work together with RICS on developing guidance to support valuers in assessing impact of sustainability. We expect new guidance to be available early 2018.”