Going green with your property has always remained a questionable business investment, especially for your rental property market. However in recent times, tenants want to part take in the eco- friendly lifestyle approach, forcing property portfolios to change and adapt to this new environmental age. The second and more important one to property owners is that it makes sense, from all angles.  It is fundamental that landlords adapt to a green property portfolio. Let’s explain why going green is not just good for the environment, but for your financial growth as well.

“The commercial property industry has shifted fundamentally since the emergence of the green building movement and the development of green building certification such as Green Star SA. A new balance of costs and benefits has been introduced to the property market, with landlords and tenants still navigating their way through this new territory.”

Green Building Council, SA

Before any further questions are asked, shouldn’t we start with the most important one of all.

If your target market, thus tenant pool is demanding this new environmentally friendly approach, do you have any other option other than adopting to this approach.  

Thus giving your tenants exactly what they want by embracing the green movement.  

There is no point in selling lemons when everyone wants oranges – give your customers what they want by going green.  We can see this change not only in residential rental properties, but also in the corporate and industrial industries.

The past method of the utilities bills are changing, as tenants were responsible for the running cost while the landlord were responsible for the initial and maintenance cost.  

There has been stong indication that landlords will become rosponsible for the utilities bills, the pressures on landlords to fit the bill are increasing, this is the new environmental age.

” In the office sector, on average, this balance for the landlord rose to 31% in 2012 (according to SAPOA’s Operating Cost Report for 2013). Industrial also experienced an upward trend, peaking at 26%, but retail declined to 22%, due to better recovery of variable expenses and robust rental growth. In the office sector, the primary driver of this trend was vacancies, whilst in industrial, rentals failed to keep up with cost inflation, meaning that the property owner is generally footing more of the bill than before. The challenge for the industry is that the majority of these cost push factors have been items out of their control, such as administered prices. In 2012 alone, as depicted by SAPOA, electricity and rates & taxes constituted 55% of total costs, with these items having risen by 16.8% and 13.5% year on year in 2012 respectively.”

By Mabuse Moja | Invested | 2013

Basically what this all means is that tenants are slowly but surely paying less of their utilities.  While landlords need/forced to feed the bill, while this particular (utilities) bill remains completely out of their control.  Paying for someone else, while not having control over how much they spend… it seems a bit like a blank cheque scenario. With these facts (as old as they are) it would make good logical sense to consider the total cost of the utilities bill.  

Operations Cost + Initial Cost = Total Utilities’ Cost

It suddenly doesn’t make sense to replace the broken geyser with a standard cheap one, as the solar geyser is but a few thousand Rands more, that will pay itself off several times over.  Consider those long hot showers you may have to pay for.  This might not yet entirely be the case for residential rentals, but we are all aware that it is moving in that direction.  

Landlords might think that the eco-friendly way is just too a substantial expense, but you have to consider the present functionality against the lifespan of the product/building.

We need to remember that industrial landlords are feeding the bill already, while residential and corporate tenants are demanding this lifestyle change.  We are going green, simply adapt and share in the benefits.

What it means to go Green

There are a few factors to consider when designing your green property portfolio:

  • Needs to lower operating costs
  • Yields a higher returns on assets
  • Enhanced property marketability
  • Hold a stronger tenant retention
  • Increased productivity

“In addition, according to the GBSA, Green Star buildings should enjoy savings of between 20-50% compared to buildings designed to previous SANS 204 standards, enhancing the appeal to comply.”

By Mabuse Moja | Invested | 2013

The technological advancement in green technology has skyrocketed over the last few years.  The time to become an Eco-friendly landlord by changing your property portfolio is now.  Financially it has become worth your time and money, if not to ensure you stay above another with your wider tenant pool.

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Written by Lizl Brink, Lizl is copywriter and designer based in Johannesburg, she is also a frequent contributor to the Mafadi blog, and as an Urban investor and rejuvenation shares a passion for urban regeneration, go check out her personal portfolio here
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