Tevlingveien 15: Sustainability measures gave higher valuation
December 7, 2022
“Made a significant difference in our valuation of the property at Tevlingveien 15,” Newsec CEO Jon H. Dahlberg Årstad says.
In the spring of 2022 Karlander Eiendom and the tenants of Tevlingveien 15 initiated a series of sustainability measures to improve the efficiency of the 6000 square meter office-building at Alna in Oslo.
“We installed solar panels on the roof, improved waste separation with Carrot, changed ventilation system and established a centralized operations system,” Karlander Eiendom CEO Joakim Fuglerud says.
(the article continues below the image)
Green financing
With measurement and documentation through VARIG®, Karlander Eiendom applied for green financing from SpareBank1 SMN.
“We showed how the tenants could effectively be engaged and how accurately we could monitor and measure the effects through VARIG®. SpareBank1 SMN saw how our green measures contributed to more value being created. This ensured a green loan to finance the measure,” Fuglerud explains.
The measures was aimed at making the building operations more effective.
“This way we could reduce the shared costs, making the building even more attractive for tenants. Which in turn would increase the building’s value,” he says.
The financial developments in 2022 would turn the situation on its head.
Depreciations and increased ESG-demands
Higher interest rates, the risk of reduced financial operability from tenants, and general unease in the global financial markets, are already affecting valuations of commercial real estate in Norway, according to Dahlberg Årstad at Newsec.
“Several European markets are facing risk of recession. As energy prices are soaring across the continent, we see considerable added expenses affecting owners and tenants of commercial real estate in Norway. All measures reducing energy consumption are welcomed savings for tenants and owners alike. We see several examples of the overal potential cost for tenants being reduced with 200 to 400 Norwegian kroner per square meeter. This added value gives grounds for a higher valuation compared to less energy efficient buildings,” he says.
Dahlberg Årstad explains that they generally see increased demands from investors, banks, and partially tenants, for ESG-documentation within commercial real estate.
“The most important driver is the EU-taxonomy, issuing the standards for what can be classified as a green investment, or not. The energy consumption and classification of buildings are having a steadily increasing impact on the property values. Sustainability and energy are therefore becoming more key in our valuations,” he says.
Subdued depreciation
Fuglerud provided documentation from VARIG®, proving how the measures would increase the building’s efficiency. That gave an immediate effect.
“The measures and documentation made it possible for us to lower our estimated depreciation,” Dahlberg Årstad says.
The valutaion ensured Karlander Eiendom did not challenge the LTV (loan-to-value) or any of the other terms of the building’s financial agreements.
“In addition, the sustainability measures contributed to expand the down payment horizon on our loan from SMN, providing us with flexibility. Our tenants will also be net positive from our collective effort. We are now far better equipped to meet the increasing sustainability demands with which our industry are faced,” Fuglerud says.
Pressure on commercial real estate
VARIG® Communications Director Jeppe Grøttland says Karlander Eiendom’s experience is a good example of how proper sustainability measures can help secure property values.
“The commercial real estate industry is under an increasing pressure to act and work systematically on sustainability. This entails having the complete overview, work on continuous improvements and report compliantly,” Grøttland says, before concluding:
“We’re now being contacted by several commercial real estate companies, that previously hasn’t had sustainability on the top of their agenda, eager to get going. This is a very positive development. Diligent sustainability work is key to safeguard the values of Norwegian commercial real estate going forward.
Book a free demo