Market ResearchThe Irish property market will have to adjust to a new green, climate-friendly environment or risk diminishing returns in the long term while the green agenda that demands sustainable development will also influence how financial institutions respond to investment opportunities

The impact of the green agenda on property development is explored in a new report from CB Richard Ellis called Energy Efficiency and Sustainability. This report highlights the benefits and risks for companies as they respond to the green agenda.

"Despite the increasing awareness of the need to incorporate sustainable features into building design and the knowledge that legislative change is looming on the horizon, energy-efficient buildings are still the exception rather than the rule in the Irish property market," said the company's director of research, Marie Hunt. She was speaking at a special seminar hosted by CB Richard Ellis to launch the report.

"Few disagree with the concept of sustainability but the majority of developers are still reluctant to implement it, particularly if it is likely to cost more and offer little financial reward in the immediate term," she claimed.

Yet developers who fail to respond to the green agenda are likely to be overtaken by events as the market begins over the next few years to adjust to environmentally-conscious development. Occupier demand for sustainable buildings was on the increase in Europe generally, says James Mulhall of CB Richard Ellis. "This has huge implications for the Irish market when you consider that 54 per cent of office take-up in the Dublin market in the first half of 2007 alone stemmed from international occupiers."

This suggests that the market could begin pushing for this sustainable approach before the developers respond.

This has several implications, the report suggests. Chief amongst them is that the green agenda is likely to influence the lending community, given there will be implications for the marketability and value of the property assets they finance.

Another likely impact is that a two-tier investment market could emerge in the coming years, with buildings holding a high energy efficiency rating commanding a higher value than those with a low rating.

The CB Richard Ellis report claims that well-located and well-designed green buildings will offer superior returns in the medium to long term while older buildings will experience accelerated obsolescence and reduced returns. "This is something that investors and lending institutions need to become increasingly mindful of," the report suggests.

"Whilst we don't believe that tenants in the Irish market are as yet prepared to pay extra to occupy energy-efficient buildings, they are increasingly demanding them and there is no option at this point but to embrace this issue," Hunt says.