Green Noise or Green Value? Measuring the Effects of Environmental Certification on Office Property Values

25 Pages Posted: 4 Jun 2008 Last revised: 13 Jun 2014

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: July 15, 2008

Abstract

The environmental performance of a building is rapidly gaining importance as a metric in real estate investments. This study investigates the price effects of environmental certification on commercial real estate assets. It is argued that there are likely to be three main drivers of price differences between certified and non-certified buildings. These are additional occupier benefits, lower holding costs for investors and a lower risk premium. Drawing upon the CoStar database of US commercial real estate assets, hedonic regression analysis is used to measure the effect of certification on both rent and price. The results suggest that, compared to buildings in the same submarkets, eco-certified buildings have both a rental and sale price premium.

Keywords: Green buildings, LEED, Energy Star certification, commercial real estate, appraisal, partial equilibrium, price premium, innovation diffusion

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

Suggested Citation

Fuerst, Franz and McAllister, Patrick M., Green Noise or Green Value? Measuring the Effects of Environmental Certification on Office Property Values (July 15, 2008). Available at SSRN: https://ssrn.com/abstract=1140409 or http://dx.doi.org/10.2139/ssrn.1140409

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
Melbourne, Victoria 3010
Australia

City University of New York - Center for Urban Research

CUNY The Graduate Center
New York, NY 10011
United States

Patrick M. McAllister

University of Reading - Department of Real Estate and Planning ( email )

Reading RG6 6AW
United Kingdom

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