A new study conducted by the University of California at Berkeley and Lawrence Berkeley National Laboratory has made a connection that may help real estate lenders issue safer loans. Trepp reports that there is a tight correlation between efficient energy use and the likelihood of loan default. The study, funded by the Department of Energy, was conducted within Boston, Minneapolis, New York City, Philadelphia, and Washington, D.C., between 2000 and 2012.
The results of this study concluded that “building-level energy use and price are statistically and economically associated with commercial mortgage defaults”, according to Trepp.com. Buildings that have expensive energy costs or inefficient energy use result in unnecessary loss of cash. The report tells lenders to make use of a building’s Site and Source EUI as this will be a good indicator of the property’s overall use efficiency. This result urges lenders to carefully examine a building’s energy efficiency before issuing a loan.