Paper Conference

Proceedings of Building Simulation 2017: 15th Conference of IBPSA

     

Connecting Environmental Performance Analysis to Cash Flow Modeling for Financial Valuation of Buildings in Early Design

Irmak Turan, Andrea Chegut, Christoph Reinhart
Massachusetts Institute of Technology, Cambridge, MA, USA

DOI: https://doi.org/10.26868/25222708.2017.205
Abstract: We propose a new design workflow that links environmental performance analysis and financial cash flow modeling. The purpose of this work is to associate sustainable design measures with their potential economic premiums. Our approach assumes that the value of a design intervention is correlated with its financial return: incremental increases in design performance leads to proportional increases in real estate rent value. We tested the proposed design and financial workflow in six pre-concept urban design projects in Boston, Lisbon and Kuwait City. We optimized daylight availability and walkability in each project. Then, we applied a premium to the rent price of each space based on the increased design performance. The applied value-add is based on previous empirical research of sustainability premiums in rent prices. Our results show that increasing the rent prices based on performance can provide up to 5% improvement in the simple yield for a project, producing an incremental cash flow in operation of the property. The results illustrate that, in addition to increasing the design quality, improved performance can add economic value to a project.
Pages: 773 - 782
Paper:
BS2017_205