Green Design and the Market for Commercial Office Space

Posted: 5 Apr 2010

See all articles by Jonathan Wiley

Jonathan Wiley

College of Charleston

Justin Benefield

College of Charleston

Ken H. Johnson

Florida Atlantic University - Finance

Date Written: April 5, 2010

Abstract

This paper considers the relationship between energy-efficient design and the leasing/sales markets for commercial real estate. An economic model is provided that considers lease rates and occupancy in simultaneous equilibrium. The behavior of both is predicted to be influenced by efficient design attributes. Selling price is determined by both rents and occupancy; therefore the impact of efficient design on commercial sales activity should be distributed through the leasing market. The model is tested empirically using a national sample of sales and leasing data for class A office buildings. The evidence indicates that "green" buildings achieve superior rents and sustain significantly higher occupancy. The improved performance in the rental market is reflected in a significant premium for the selling price of Energy Star-labeled and LEED-certified properties.

Keywords: Green Design, Office, Leasing, Pricing

Suggested Citation

Wiley, Jonathan and Benefield, Justin and Johnson, Ken H., Green Design and the Market for Commercial Office Space (April 5, 2010). Journal of Real Estate Finance and Economics, Vol. 41, No. 2, 2010. Available at SSRN: https://ssrn.com/abstract=1584708

Jonathan Wiley (Contact Author)

College of Charleston ( email )

66 George Street
Charleston, SC 29424
United States

Justin Benefield

College of Charleston ( email )

66 George Street
Charleston, SC 29424
United States

Ken H. Johnson

Florida Atlantic University - Finance ( email )

777 Glades Rd
Boca Raton, FL 33431
United States

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