The construction sector generates enormous amounts of waste and consumes more than a third of all global resources. It is thus largely responsible for climate change and resource scarcity. The circular economy in the built environment is a fundamental solution to reducing waste production and is therefore part of the international effort to achieve climate goals.
The global trend towards sustainable real estate
Investments in sustainable real estate are in trend worldwide. On the institutional investor side, the growing importance of impact investing and the establishment of ESG guidelines can also be seen. In short: there is a growing awareness of reducing CO2 emissions and more and more companies see climate protection as both a challenge and an opportunity. In order to support this development and promote public discourse, solid evidence of the economic advantages of sustainable real estate investments is now needed
Investment decisions are based on various evaluation metrics
Investors base their decisions on different criteria. When valuing a property, a combination of the capitalized earnings method (determining the market value of a property based on the income streams) and the real value method (valuation using aggregated costs from land value, construction and depreciation) are usually used. Certain parameters (notably location and neighborhood, age and condition, expected income, and interest rate, among a few others) are considered in all types of valuation methods, but they can vary depending on the type of valuation, the purpose of the valuation, and sometimes differ depending on the evaluator himself.
Circular evaluation thanks to subjective evaluation parameters
The parameters involved in the assessment can be categorized into “factual” and “subjective” parameters. The basis for this division is whether or not they can be influenced by external interventions and considerations. Factual parameters are beyond any interpretation. The subjective parameters give scope for the inclusion of circular principles in the assessment.
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These guidelines include maximizing the possibility of the reuse of components. In other words, the “more homogeneous” the components are the better chances of reuse that is sustainable, leading to a greater value when it comes to exchanging or dismantling, leading to a better market value. Another indirect result of this principle is the development of “healthy” buildings. Healthy buildings are ones where enhanced air quality and cozy indoor climate are produced by the choice of materials and construction. In the commercial industry, the use of healthy buildings has been found to reduce the amount of sick time and improve productivity.
Wealthy Taxation: Real Estate Valuation under Circularity Aspects
There are a number of well-known real-estate companies that have adopted circularity as a concept in their areas of realistic appraisal of property. Their valuation strategies seek to determine the lowest potential value that could be obtained by analyzing the value of residual materials and other components that can be reused. Wealthy taxation is among the primary circular value techniques which consider as well the worth of raw materials as well as the value of components of an existing building. It is based on the concept that there are many components and materials in buildings that have a greater lifespan over the entire economic life of the entire building.
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