The Operating Expense Puzzle of US Green Office Buildings

33 Pages Posted: 25 Oct 2012 Last revised: 21 May 2013

See all articles by Nikodem Szumilo

Nikodem Szumilo

UCL - University College London

Franz Fuerst

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

Date Written: October 23, 2012

Abstract

Cost savings from efficiency gains are at the core of the green building business case. Significantly lower energy bills are said to be a major factor in the green rent premium that has been observed in earlier studies. Our study tests this relationship by, inferring energy costs from operating expenses for a large dataset of US office buildings and relating them to the rental rates in a hedonic framework. We find that eco-certification is associated with a higher than anticipated total energy expenditure. While our dataset does not contain a direct measure of actual energy consumption, this result puts the cost-saving argument into question. By contrast, this study confirms earlier findings of a green rent premium but it appears that this premium might be an effect of factors unrelated to a tenant’s operating expenses.

Keywords: Green buildings, eco-certification, commercial real estate, pricing of energy efficiency

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

Suggested Citation

Szumilo, Nikodem and Fuerst, Franz, The Operating Expense Puzzle of US Green Office Buildings (October 23, 2012). Available at SSRN: https://ssrn.com/abstract=2166028 or http://dx.doi.org/10.2139/ssrn.2166028

Nikodem Szumilo

UCL - University College London ( email )

Gower Street
London, WC1E 6BT
United Kingdom

Franz Fuerst (Contact Author)

University of Cambridge - Department of Land Economy ( email )

19 Silver Street
Cambridge, CB3 9EP
United Kingdom

HOME PAGE: http://www.landecon.cam.ac.uk/directory/dr-franz-fuerst

University of Melbourne ( email )

185 Pelham Street
Carlton, Victoria 3053
Australia

City University of New York - Center for Urban Research

CUNY The Graduate Center
New York, NY 10011
United States

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