The Operating Expense Puzzle of US Green Office Buildings
33 Pages Posted: 25 Oct 2012 Last revised: 21 May 2013
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
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