Green Performs Better: Energy Efficiency and Financial Return on Buildings

Journal of Corporate Real Estate, Vol. 15 No. 1, 2013, pp. 53-72

Posted: 7 Dec 2013

See all articles by Marcelo Cajias

Marcelo Cajias

PATRIZIA AG; Universität Regensburg

Daniel Piazolo

THM Technische Hochschule Mittelhessen

Multiple version iconThere are 2 versions of this paper

Date Written: December 3, 2013


The purpose of this paper is to investigate the effect of energy consumption on the financial performance of German residential buildings in a large panel framework. The authors provide evidence that energy efficiency in the residential sector is a relevant factor affecting both tenant investment decisions and consequently the performance of investor portfolios.

Based on the IPD Database and information from the German statistical office, the authors create portfolios of buildings across several energy consumption levels in order to describe the energy pricing mechanism in the context of total return and rent price. Furthermore, the authors apply conditional and unconditional regressions over the period of 2008 and 2010, to accurately quantify the energy price premium in the German residential market.

The descriptive portfolio results show that energy-efficient buildings yield an up to 3.15 percent higher return and 0.76 e/m2 higher rent than inefficient buildings. Furthermore, the regression results indicate that a one percent decline in energy consumption affects the total return of buildings positively by þ0.015 percent. The hedonic results additionally show that one percent energy conservation boosts rent prices by þ0.08 percent and market value by þ0.45 percent, ceteris paribus.

Overall, the study presents an alternative methodology for describing and estimating hedonic datasets and offers some initial empirical evidence on the energy price premium in German residential markets. The paper contributes to prior European studies regarding the use and implications of energy performance certificates and confirms their significant impact on residential housing performance variables.

Keywords: Germany, Housing, Residential property, Energy consumption, Energy performance certificates, Portfolio estimation, Energy efficiency, Sustainability, Quantile regression

JEL Classification: L85, C43, R33, E44

Suggested Citation

Cajias, Marcelo and Piazolo, Daniel, Green Performs Better: Energy Efficiency and Financial Return on Buildings (December 3, 2013). Journal of Corporate Real Estate, Vol. 15 No. 1, 2013, pp. 53-72, Available at SSRN:

Marcelo Cajias (Contact Author)

PATRIZIA AG ( email )

Fuggerstr. 26
Augsburg, 86150
+49 (0) 151 17215198 (Phone)


Universität Regensburg ( email )

93040 Regensburg
D-93040 Regensburg, 93053

Daniel Piazolo

THM Technische Hochschule Mittelhessen ( email )

University of Applied Sciences
Wilhelm-Leuschner-Straße 13
Friedberg, 61169


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