The Impact of Sustainability on the Value of Commercial Office Buildings in Malaysia : Russian-Doll Model Approach

The development of sustainable buildings continues to gain momentum in Malaysia due to its many benefits. The Kuala Lumpur City Hall stipulated that the construction of every commercial building must meet the requirements of green features with at least ‘GBI Gold’ level or equivalent. With the growing interest in green development, questions were raised on whether there is enhancement to the market value of green-rated properties and vice-versa. As most of the commercial office buildings are used for functions and office spaces by most organisations, they are considered a service oriented entity and can significantly benefit from having sustainability attributes. Hence, green properties are considered to be more marketable and attractive for investment purpose. However, at present, the differences in rental rates in Malaysia between green and non-green commercial office buildings are rather small. The difference is more to supply and demand factors within the specific location rather than green features factor. Therefore, this paper hopes to highlight the possible impact of economics, the environment and social attributes on the value of commercial office building incorporating with the Russian-Doll model. The highlighted sustainable attributes will provide guidance and justification in valuing real estate incorporating sustainability.