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"Green" refurbishments under uncertainty
KTH, School of Architecture and the Built Environment (ABE), Real Estate and Construction Management, Building and Real Estate Economics.ORCID iD: 0000-0003-4921-9479
KTH, School of Architecture and the Built Environment (ABE), Real Estate and Construction Management, Building and Real Estate Economics.ORCID iD: 0000-0003-4849-0726
2015 (English)Report (Other academic)
Abstract [en]

It is often argued that great energy savings can be accomplished by upgrading existing energy-inefficient building stock. However, even if these investments are profitable at the time, it might be even better to postpone these measures as even better investments can be realized later on. Such behavior can be analyzed by applying the real options analysis (ROA) framework. In addition, the retrofit scenario differs from the new development case, as the former is affected by the value of the already existing building, since this value must be "surrendered" in order to acquire revenues from the retrofitted building. The main purpose of this paper is to evaluate green refurbishments using the real options methodology. In doing so, we are able to accurately estimate the "embedded" real option values of deferring green refurbishments, thereby adding to current explanations of the energy-efficiency gap. This paper also discusses policy suggestions to reduce the value of waiting and thus trigger these refurbishments today.

Place, publisher, year, edition, pages
Stockholm: KTH Royal Institute of Technology, 2015. , 17 p.
, Working Paper Series, Department of Real Estate and Construction Management & Centre for Banking and Finance (cefin), KTH, 2015:11
Keyword [en]
Refurbishment, Real options, Green building, Timing option, Real estate
National Category
Economics and Business
URN: urn:nbn:se:kth:diva-181323OAI: diva2:899255

QC 20160225

Available from: 2016-02-01 Created: 2016-02-01 Last updated: 2016-04-07Bibliographically approved
In thesis
1. Green Buildings: Exploring performance and thresholds
Open this publication in new window or tab >>Green Buildings: Exploring performance and thresholds
2016 (English)Doctoral thesis, comprehensive summary (Other academic)
Abstract [en]

The overall aim of this research project is to study green/energy-efficient real estate from an economic perspective. The thesis summarizes the results from five different studies with a connection to green/energy-efficient real estate.The aim of the first paper (paper A) is to study how tenants perceive the indoor environment in green-rated premises, and to compare these results with tenants’ perception of a conventional building’s indoor environment. The main result is that the tenants in the green-rated building are more satisfied with the indoor environment than the tenants in the conventional building.Papers B and C assess whether energy efficiency has an impact on buildings’ income and market values using Swedish real-estate data. The key result is that although there is a small impact on building-related income, this does not seem to translate into a higher market value.The last two papers included in this thesis study hindrances to a more energy-efficient building sector. In paper D, two office buildings are used as baseline cases to provide insights into the difficulties that can arise when trying to upgrade a building to make it more energy efficient. The results indicate that changing existing leases is a prohibitive process and that it is often difficult to evaluate the final impact of an energy upgrade. The last paper focuses on why it may be rational to postpone green refurbishments even if they are profitable. The main result is that it may be rational to postpone such refurbishments. However, by introducing different financial penalties and/or subsidies, these investments could be triggered today.To sum up, the results indicate that green buildings are preferred by tenants, but that there still appear to be economic barriers to a greener building sector.

Abstract [sv]

Det övergripande syftet med denna avhandling är att studera grön/energieffektiva byggnader ur ett ekonomiskt perspektiv. Avhandlingen består av en kappa och fem separata studier, vilka belyser tre olika forskningsfrågor.

Syftet med den första studien är att studera hur hyresgäster upplever inomhusmiljön i gröna byggnader. I studien jämförs inomhusmiljön i en grön byggnad med inomhusmiljön i en likvärdig konventionell byggnad. Resultatet visar, på det stora hela, att hyresgästerna är mer nöjda med inomhusmiljön i den gröna byggnaden. De nästföljande studierna, B respektive C, undersöker om byggnadens energiprestanda har någon inverkan på dess hyra respektive marknadsvärde. Resultaten visar på en liten signifikant hyrespåverkan, dock verkar denna inte ha någon effekt på byggnadernas marknadsvärdebedömningar. Skälet till detta kan vara att hyrespremien anses för liten för att ha någon signifikant inverkan på byggnadens marknadsvärde, alternativt att fastighetsvärderare inte beaktar energiprestanda när en fastighet värderas.

De två sista studierna studerar varför vissa, tillsynes lönsamma, energiinvesteringar inte genomförs. Resultaten från studie D visar på svårigheterna med att ingå ett samarbetsavtal (för att eliminera felaktiga incitament) mellan hyresgäst och hyresvärd. Sådana avtal tar lång tid att förhandla fram och det uppkommer ofta svårigheter med att utvärdera de tänkta energiinvesteringarnas ekonomiska utfall. Studie E utgår ifrån en realoptionsmodell, vilken används för att utvärdera när ”gröna” renoveringar bör genomföras i en befintlig byggnad. Studien visar att det kan vara rationellt att vänta trots att investeringen idag är lönsam. Vidare visar resultaten att det är möjligt att via byggsubventioner/finansiella ”straff” påverka aktörer att tidigarelägga energieffektiviseringsåtgärder.  Dock är det viktigt att dessa utformas korrekt så att det inte skapar några snedvridna incitament.

Övergripande visar resultaten att gröna byggnader är att föredra ur ett brukarperspektiv men att det fortfarande finns ekonomiska hinder för en mer hållbar byggsektor.

Nyckelord: gröna byggnader, energieffektiva byggnader, EPC, inomhusmiljö, Realoptioner, fastighetsekonomi.

Place, publisher, year, edition, pages
Stockholm: KTH Royal Institute of Technology, 2016. x, 31 p.
TRITA-FOB, 2016:3
Green Buildings, Energy-Efficient Buildings, EPC, Indoor Environment Quality (IEQ), Real Options Analyses (ROA), Real-Estate Economics
National Category
Research subject
Real Estate and Construction Management
urn:nbn:se:kth:diva-184874 (URN)978-91-85783-65-6 (ISBN)
Public defence
2016-04-29, Sal F3, Lindstedtsvägen 26, KTH, Stockholm, 14:00 (English)

QC 20160407

Available from: 2016-04-07 Created: 2016-04-06 Last updated: 2016-04-07Bibliographically approved

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