New Evidence on the Green Building Rent and Price Premium

Fuerst, Franz; McAllister, Patrick M.

doi:10.2139/ssrn.1372440

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New Evidence on the Green Building Rent and Price Premium

Posted: 5 Apr 2009 Last revised: 16 Mar 2017

See all articles by Franz Fuerst

Franz Fuerst

University of Cambridge - Department of Land Economy; University of Melbourne; City University of New York - Center for Urban Research

Patrick M. McAllister

University of Reading - Department of Real Estate and Planning

Date Written: April 3, 2009

Abstract

This paper investigates the effect of voluntary eco-certification on the rental and sale prices of US commercial office properties. Hedonic and logistic regressions are used to test whether there are rental and sale price premiums for LEED and Energy Star certified buildings.

The results of the hedonic analysis suggest that there is a rental premium of approximately 6% for LEED and Energy Star certification. A significant sale price premium was also identified using a sample of 127 LEED rated buildings and 662 buildings of Energy Star rated buildings. When compared to samples of similar buildings identified by a binomial logistic regression for Energy Star-certified buildings, the existence of a rent and sales price premium is confirmed albeit with differences regarding the magnitude of the premium.

Overall, the results of this study confirm that LEED and Energy Star buildings exhibit higher rental rates and sales prices per square foot controlling for a large number of location- and property-specific factors.

Keywords: Green buildings, LEED, Energy Star certification, commercial real estate, appraisal, price premium

JEL Classification: R33, Q2, Q4, M2, C31, C5

Suggested Citation: Suggested Citation

Fuerst, Franz and McAllister, Patrick M., New Evidence on the Green Building Rent and Price Premium (April 3, 2009). Available at SSRN: https://ssrn.com/abstract=1372440 or http://dx.doi.org/10.2139/ssrn.1372440