Effect of LEED Ratings and Levels on Office Property Assessed and Market Values

Dermisi, Sofia

doi:10.1080/10835547.2009.12091789

Cited by 69 publications

(10 citation statements)

References 4 publications

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“…This was subsequently supported by other US green office building research that empirically assessed a range of office property performance measures, including rent, sale price, vacancy and productivity, to demonstrate the business case and premium for green office buildings (e.g. Dermisi, 2009;Eichholtz et al, 2010b;Fuerst, 2009;Fuerst andMcAllister, 2009, 2011a, b, c;Harrison and Seiler, 2011;Kok and Jennen, 2012;Kok et al, 2011;Miller et al, 2008Miller et al, , 2009Pivo and Fisher, 2010;Reichardt et al, 2012;Wiley et al, 2010). This empirical research focused on US green office buildings and compared portfolios of green office properties (e.g.…”

Section: Research On Green Office Buildingsmentioning

confidence: 87%

Assessing energy rating premiums in the performance of green office buildings in Australia

Newell

Macfarlane

Walker

2014

Journal of Property Investment &Amp; Finance

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Purpose – Green office buildings have recently taken on increased significance in institutional property portfolios in Australia and globally. The key issue from an institutional investor perspective is the assessment of whether green office buildings add value. Using an extensive portfolio of green office buildings, the purpose of this paper is to empirically assess the level of energy rating premiums in the property performance of green office buildings in Australia. Design/methodology/approach – Using a portfolio of over 200 green office buildings in Australia benchmarked against a comparable portfolio of non-green office buildings, the level of energy rating premiums in the property performance of green office buildings in Australia is empirically evaluated. Hedonic regression analysis is used to account for differences between specific office buildings and to explicitly identify the “pure” green effect in identifying the level of energy rating premiums in several commercial property performance characteristics (e.g. office value, rent). Findings – The empirical results show the added-value premium of the 5-star National Australian Built Environment Rating Scheme (NABERS) energy rating scheme and the Green Star scheme in the property performance of green office buildings in Australia, including office values and rents. Energy rating premiums for green office buildings are evident at the top energy ratings and energy rating discounts at the lower energy ratings. The added-value “top-end” premium of the 5-star vs 4-star NABERS energy rating category is clearly identified for the various property performance parameters, including office values and rents. Practical implications – This paper empirically determines the presence of energy rating premiums at the top energy ratings in the performance of green office buildings, as well as energy rating discounts at the lower energy ratings. This clearly highlights the added value dimension of energy efficiency in green office buildings and the need for the major office property investors to prioritise the highest energy rating to facilitate additional property performance premiums. This will also see green office buildings become the norm as the market benchmark rather than non-green office buildings. Social implications – This paper highlights energy performance premiums for green office buildings. This fits into the context of sustainability in the property industry and the broader aspects of corporate social responsibility in the property industry. Originality/value – This paper is the first published property research analysis on the detailed determination of energy rating premiums across the energy rating spectrum for green office buildings in Australia. Given the increased focus on energy efficiency and green office buildings, this research enables empirically validated and practical property investment decisions by office property investors regarding the importance of energy efficiency and green office buildings, and the priority to achieve the highest energy rating to maximise property performance premiums in office values and rents.

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Section: Research On Green Office Buildingsmentioning

confidence: 87%

Assessing energy rating premiums in the performance of green office buildings in Australia

Newell

Macfarlane

Walker

2014

Journal of Property Investment &Amp; Finance

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“…The sale price premiums are 17-37 per cent. Dermisi (2009)[2] has examined the effect that LEED ratings have on office property assessed and market values in the USA. The statistically significant effects demonstrate that Energy Star certification contributes to an average premium of 98 and 79 per cent in assessed values, and 90 per cent in market values.…”

Section: Literature Review: a Summary Of Revealed Preference Techniquesmentioning

confidence: 99%

Do green buildings capture higher market valuations and lower vacancy rates? A Canadian case study of LEED and BOMA-BEST properties

Rahman

Rowlands

Weber

2017

SASBE

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Purpose It is becoming increasingly clear that as the pressures of climate change increase around the world, all nations must strive to lower their carbon footprint through conservation. If the growth trend of green building and infrastructure construction is to be continued and improved upon, then evidence must be collected as to the benefits they bring about, and the level of support they enjoy in the market. The purpose of this paper is to shed light on the economic performance of green buildings by evaluating whether LEED for Homes and BOMA-BEST properties capture higher market valuations and lower vacancy rates. These types of research questions have not been investigated to a great deal in the Canadian context. The primary analysis concerning municipal market valuation of green buildings was conducted using robust ordinary least squares and logistic regression models. Commercial vacancy rates were compared through the use of χ2 tests. Our analysis did not lead to conclusive evidence that there exists a “green” premium in the real estate market with respect to municipal market valuations. The authors argue that this may largely be due to municipal appraisal methods that currently do not incorporate sustainability factors. As such, they may not adequately reflect market tastes and trends. Furthermore, while the vacancy rates of green commercial buildings were, on the whole, lower than their non-green counterparts, the differences were not statistically significant. Given these results, the authors propose a set of research activities that the academic community should pursue. Design/methodology/approach Statistical techniques are utilized test whether green certification (LEED/BOMA-BEST) leads to higher municipal valuation for both commercial and residential green properties, using regression analysis. Furthermore, χ2 tests are conducted to evaluate whether certification leads to lower vacancy rates for commercial properties. Findings In terms of valuation, certification does not exert (on average) a positive role in terms of higher valuations for both commercial and residential properties. However, with respect to vacancy rates, there is a tendency towards lower vacancy rates for green properties, but the relationship is not statistically significant. Research limitations/implications The next set of research needs to gather greater amount of data with respect to how municipal evaluations are performed since the results are counter-intuitive. Greater tracking of the financial performance of green buildings should be conducted and made available for both public and private bodies. Particularly, rental and sale prices of green buildings need to be tracked in an organized manner. Practical implications The valuation techniques utilized by the municipal authorities need revision as green properties are being assessed without appropriate guidance from educational institutions. Furthermore, the limited amount of “green” valuation techniques in existence may not be applied. Originality/value This is the first Canadian-based research looking into the valuation of green certification using rigorous quantitative statistical techniques and original and publicly available data. Furthermore, it holds important lessons for municipal authorities with respect to green building valuation beyond Canada as the limitations of current practice go mostly likely beyond the North American context.

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“…The issue of the corporate governance of REITs has also taken on broader international practical significance recently, with the Asia Pacific Real Estate Association (APREA) and European Public Real Estate Association (EPRA) examining practical corporate governance issues for Asia REITs (e.g. Singapore) and European property companies, respectively.Assessing the added premium for green buildings (Dermisi, 2009; Eichholtz et al , 2009, 2010; Fuerst, 2009; Fuerst and McAllister, 2009, 2011; Miller et al , 2008, 2009; Pivo and Fisher, 2010; Wiley et al , 2010). This research sought to identify whether a green building added‐value premium was present, assessing rental and sale price differences for a green building portfolio against a benchmark non‐green building portfolio, largely using the extensive CoStar US commercial property database.…”

Section: Introductionmentioning

confidence: 99%

Influence of the corporate social responsibility factors and financial factors on REIT performance in Australia

Newell

Lee

2012

J of Property Inv & Finance

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PurposeCorporate social responsibility (CSR) has taken on increased stature and importance in recent years, as property investors have given an increased priority to environmental, social and corporate governance issues in their property investment decision‐making. The purpose of this paper is to empirically examine the impact of CSR factors and financial factors on the performance of Real Estate Investment Trusts (REITs) in Australia (A‐REITs) and assess whether these three CSR factors are separately priced by A‐REIT investors in uniquely adding value to A‐REIT investment performance.Design/methodology/approachUsing CSR rating factors and financial factors for the 16 A‐REITs in the ASX200, cross‐sectional multi‐factor models are employed to identify the separate pricing of these CSR factors in A‐REIT performance over 2005‐2010.FindingsThe empirical results show that the environmental, social and corporate governance dimensions of CSR are not currently separately priced by A‐REIT investors, with most of the A‐REIT performance accounted for by the financial factors. Amongst the three CSR dimensions, corporate governance is seen to be the most influential CSR factor on A‐REIT performance.Practical implicationsThis paper empirically determines that the CSR dimensions of environment, social and corporate governance are currently less influential than the financial factors of size, book‐to‐market value, gearing and beta in influencing A‐REIT performance. Given the increased role of CSR amongst A‐REITs, corporate governance is seen to have a more influential role in A‐REIT pricing than either environmental or social factors. This finding also has practical implications for CSR practices in other REIT markets internationally.Originality/valueThis paper is the first published property research analysis on the separate role of CSR factors, compared to the traditional financial factors, in the performance of A‐REITs. Given the increased focus on CSR by property investors, this research enables empirically‐validated and practical property investment decisions by A‐REIT investors regarding the separate pricing of these CSR factors in A‐REIT performance.

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Effect of LEED Ratings and Levels on Office Property Assessed and Market Values

Cited by 69 publications

References 4 publications

Assessing energy rating premiums in the performance of green office buildings in Australia

Assessing energy rating premiums in the performance of green office buildings in Australia

Do green buildings capture higher market valuations and lower vacancy rates? A Canadian case study of LEED and BOMA-BEST properties

Influence of the corporate social responsibility factors and financial factors on REIT performance in Australia

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