The impact of energy performance certificates on the rental and capital values of commercial property assets: some preliminary evidence from the UK

This paper focuses on the effect of energy performance ratings on the capital values, rental values and equivalent yields of UK commercial property assets. Of which a small number are also BREEAM rated, the study is based upon 708 commercial property assets held in the IPD UK Universe drawn from across all PAS segments. Incorporating a range of controls such as unexpired lease term, vacancy rate and tenant credit risk, hedonic regression procedures are used to estimate the effect of EPC rating. The study finds no evidence of a strong relationship between environmental and/or energy performance and rental and capital value. Bearing in mind the small number of BREEAM rated assets, there was a small but statistically significant effect on equivalent yield only. Similarly, there was no evidence that the EPC rating had any effect on Market Rent or Market Value with only minor effects of EPC ratings on equivalent yields. The preliminary conclusion is that energy labelling is not yet having the effects on Market Values and Market Rents that provide incentives for market participants to improve the energy efficiency of their commercial real estate assets.

Rental depreciation and capital expenditure in the UK commercial real estate market, 1993–2009

This paper identifies the long-term rental depreciation rates for UK commercial properties and rates of capital expenditure incurred to offset depreciation over the same period. It starts by reviewing the economic depreciation literature and the rationale for adopting a longitudinal method of measurement, before discussing the data used and results. Data from 1993 to 2009 were sourced from Investment Property Databank and CB Richard Ellis real estate consultants. This is used to compare the change in values of new buildings in different locations with the change in values of individual properties in those locations. The analysis is conducted using observations on 742 assets drawn from all major segments of the commercial real estate market. Overall rental depreciation and capital expenditure rates are similar to those in other recent UK studies. Depreciation rates are 0.8% pa for offices, 0.5% pa for industrial properties and 0.3% pa for standard retail properties. These results hide interesting variations at a segment level, notably in retail where location often dominates value rather than the building. The majority of properties had little (if any) money spent on them over the last 16 years, but those subject to higher rates of expenditure were found to have lower depreciation rates.

A critical review of methodologies for measuring rental depreciation applied to UK commercial real estate

Real estate depreciation continues to be a critical issue for investors and the appraisal profession in the UK in the 1990s. Depreciation-sensitive cash flow models have been developed, but there is a real need to develop further empirical methodologies to determine rental depreciation rates for input into these models. Although building quality has been found to be an important explanatory variable in depreciation it is very difficult to incorporate it into such models or to analyse it retrospectively. It is essential to examine previous depreciation research from real estate and economics in the USA and UK to understand the issues in constructing a valid and pragmatic way of calculating rental depreciation. Distinguishing between 'depreciation' and 'obsolescence' is important, and the pattern of depreciation in any study can be influenced by such factors as the type (longitudinal or crosssectional) and timing of the study, and the market state. Longitudinal studies can analyse change more directly than cross-sectional studies. Any methodology for calculating rental depreciation rate should be formulated in the context of such issues as 'censored sample bias', 'lemons' and 'filtering', which have been highlighted in key US literature from the field of economic depreciation. Property depreciation studies in the UK have tended to overlook this literature, however. Although data limitations and constraints reduce the ability of empirical property depreciation work in the UK to consider these issues fully, 'averaging' techniques and ordinary least squares (OLS) regression can both provide a consistent way of calculating rental depreciation rates within a 'cohort' framework.

Which factors drive rental depreciation rates for office and industrial properties?

As new buildings are constructed in response to changes in technology or user requirements, the value of the existing stock will decline in relative terms. This is termed economic depreciation and it may be influenced by the age and quality of buildings, amount and timing of expenditure, and wider market and economic conditions. This study tests why individual assets experience different depreciation rates, applying panel regression techniques to 375 UK office and industrial assets. Results suggest that rental value depreciation rates reduce as buildings get older, while a composite measure of age and quality provides more explanation of depreciation than age alone. Furthermore, economic and local real estate market conditions are significant in explaining how depreciation rates change over time.

Advances in Model-Based Traffic Vision

Model based vision allows use of prior knowledge of the shape and appearance of specific objects to be used in the interpretation of a visual scene; it provides a powerful and natural way to enforce the view consistency constraint. A model based vision system has been developed within ESPRIT VIEWS: P2152 which is able to classify and track moving objects (cars and other vehicles) in complex, cluttered traffic scenes. The fundamental basis of the method has been previously reported. This paper presents recent developments which have extended the scope of the system to include (i) multiple cameras, (ii) variable camera geometry, and (iii) articulated objects. All three enhancements have easily been accommodated within the original model-based approach

A Generic Deformable Model for Vehicle Recognition

This paper reports the development of a highly parameterised 3-D model able to adopt the shapes of a wide variety of different classes of vehicles (cars, vans, buses, etc), and its subsequent specialisation to a generic car class which accounts for most commonly encountered types of car (includng saloon, hatchback and estate cars). An interactive tool has been developed to obtain sample data for vehicles from video images. A PCA description of the manually sampled data provides a deformable model in which a single instance is described as a 6 parameter vector. Both the pose and the structure of a car can be recovered by fitting the PCA model to an image. The recovered description is sufficiently accurate to discriminate between vehicle sub-classes.

An Integrated Traffic and Pedestrian Model_based Vision System

The paper describes a novel integrated vision system in which two autonomous visual modules are combined to interpret a dynamic scene. The first module employs a 3D model-based scheme to track rigid objects such as vehicles. The second module uses a 2D deformable model to track non-rigid objects such as people. The principal contribution is a novel method for handling occlusion between objects within the context of this hybrid tracking system. The practical aim of the work is to derive a scene description that is sufficiently rich to be used in a range of surveillance tasks. The paper describes each of the modules in outline before detailing the method of integration and the handling of occlusion in particular. Experimental results are presented to illustrate the performance of the system in a dynamic outdoor scene involving cars and people.

Motorcycle accident risk could be inflated by a time to arrival illusion

Purpose. Drivers adopt smaller safety margins when pulling out in front of motorcycles compared with cars. This could partly account for why the most common motorcycle/car accident involves a car violating a motorcyclist's right of way. One possible explanation is the size-arrival effect in which smaller objects are perceived to arrive later than larger objects. That is, drivers may estimate the time to arrival of motorcycles to be later than cars because motorcycles are smaller. Methods. We investigated arrival time judgments using a temporal occlusion paradigm. Drivers recruited from the student population (n = 28 and n = 33) saw video footage of oncoming vehicles and had to press a response button when they judged that vehicles would reach them. Results. In experiment 1, the time to arrival of motorcycles was estimated to be significantly later than larger vehicles (a car and a van) for different approach speeds and viewing times. In experiment 2, we investigated an alternative explanation to the size-arrival effect: that the smaller size of motorcycles places them below the threshold needed for observers to make an accurate time to arrival judgment using tau. We found that the motorcycle/car difference in arrival time estimates was maintained for very short occlusion durations when tau could be estimated for both motorcycles and cars. Conclusions. Results are consistent with the size-arrival effect and are inconsistent with the tau threshold explanation. Drivers estimate motorcycles will reach them later than cars across a range of conditions. This could have safety implications.

Green noise or green value? Measuring the effects of environmental certification on office values

This study investigates the price effects of environmental certification on commercial real estate assets. It is argued that there are likely to be three main drivers of price differences between certified and noncertified buildings. These are additional occupier benefits, lower holding costs for investors and a lower risk premium. Drawing upon the CoStar database of U.S. commercial real estate assets, hedonic regression analysis is used to measure the effect of certification on both rent and price. The results suggest that, compared to buildings in the same submarkets, eco-certified buildings have both a rental and sale price premium.