How can Circular Strategies be implemented in Real Estate Valuation Practices

Abstract

The construction sector, as one of the world's greatest waste generators, is responsible for a cascade of events such as global warming, climate change, and natural resource depletion. Raw materials are continuously extracted from nature, and the rate at which they can refill is insufficient to meet demand. This system suffers significant losses across the value chain (Ellen MacArthur Foundation, 2013). On the contrary, the circular economy concept proposes a circular model of 'reuse-refurbish-recycle' that focuses on reducing waste and optimizing resource value retention. The strategy is ideal to adopt in a high-growth, high-waste sector like the built environment. The reason this research was taken up is because a significant gap is seen within valuation practices. The current valuation methods, although efficient, collect data and provide property valuations based on previous studies. For example, when using a comparative method of property valuation, we compare one asset with a neighboring one, that has similar features. This process incorporates the older values already provided to this old building, without accounting for innovations such as reusability or adaptability of the components How different would the sector be if we incorporated the value of circular interventions to the original value determined, rather than looking back at older valuation standards? Will there be a significant difference, and, more importantly, would it impact the way real estate investors viewed circularity? On conducting the research, The primary hypothesis of this study was that there is a link between circularity and valuation and that this link can be incorporated within present valuation procedures. The thesis research explains how the connections can be made, as well as specific actual instances for each. The number of possible scenarios are endless.