Certification Matters: Is Green Talk Cheap Talk?

Abstract

There is an active and growing literature examining the rental rate, sales price, and occupancy premiums associated with sustainable or energy efficient certified real estate. To date, the focus has rested largely on office properties and for sale single family residential properties. We examine the rental rates achieved by green multifamily properties, providing the first look at the population of LEED market-rate apartments in the United States. We find an approximate 8.9 percent rental rate premium associated with LEED apartments. Moreover, this research provides the first indication that LEED certification garners an additional premium over non-certified space that identifies as green, indicating the strength of the certification signal and contributing to the longstanding discussion on the merits of certification.

Keywords: Energy Efficiency, Sustainability, Rent Premium, Occupancy Rates, Residential

JEL Classification: R11, R52, R58