Financing Energy Efficiency Improvements Increases Property Values

Increasing Access to Financing for Energy-Efficient Retrofits

UrbanLand, October 26, 2015. Image credit: Daniel Foster

For more than five years, he added, San Francisco has offered the Property Assessed Clean Energy (PACE) financing program for commercial buildings and multifamily properties with more than five units. “The PACE structure allows property owners to access long-term, 100 percent upfront financing for energy efficiency, renewable energy, and water conservation projects and pay it through their property taxes. There are now 30 active commercial PACE programs in the U.S. with basically the same structure that have funded $150 million in projects, and that number is growing every year. That’s getting to scale.”

Improving the energy efficiency of a building definitely adds value to the building, Rizzo said, but “we aren’t seeing appraisers recognize these investments as additional building value. Appraisers aren’t attributing increased value to sustainability efforts. Value is being created with rooftop solar installations, but the full value for this revenue stream is not being recognized. We think it will be eventually.”

At the same time, Rizzo said American developers need to make a strong case that financing energy efficiency projects is a good use of capital. “At Prologis, our customers are asking for energy-saving improvements, and we have several corporate sustainability initiatives,” he explained. “Since we must [offer] competitive lease rates, we want to have the lowest overall operating costs, so energy efficiency differentiates us by lowering the cost of energy for our tenants. We make the case that it costs less to operate our energy-efficient buildings.”

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