Raising the Rent Premium: Moving Green Building Research Beyond Certifications and Rent

People or Systems: Does Productivity Enhancement Matter More than Energy Management in LEED Certified Buildings?

“…A tenant's willingness to pay higher rents in certified buildings may be due to perceived improvement in productivity since employee costs represent about 90% of the total business costs for a typical tenant in an office building [35]. Out of the 39 peer-reviewed and published papers in this field commissioned by the Department of Energy, 27 papers consistently report a positive association between green building certifications and rents: rental premiums for LEED and Energy Star are estimated to be about 5% and in some cases fluctuated up to 20% [36][37][38][39][40][41][42]. These premiums are dynamic over time, space, and market segment [43,44].…”

“…There is still a lack of consensus relating to the impact of sustainability certification on operating expenses [46]. Additionally, less apparent is whether the reported premiums are the result of some underlying building characteristics leading to such certifications (i.e., green attributes such as energy and water efficiency) or the designations and labels themselves [42]. Using a revealed preferences approach, the effects of some specific factors such as air quality, efficient systems, and recycling have been investigated alongside the presence of LEED certification by Robinson, Simons, and Lee [34].…”

“…Such studies tend to be cross-sectional, with only a few employing a pooling approach using longitudinal data [37,48]. Cross-sectional methods are not able to address omitted variable bias: since the measured certification effect is likely to be correlated with other premium features of a building, it is vital to use methods that isolate the effect of certification from other confounding variables [42]. Similarly, failure to account for energy-expending features bundled with LEED EBOM certification, such as higher quality finishes and amenities, would result in the estimated effect suffering from a positive bias in energy consumption.…”

“…Similarly, failure to account for energy-expending features bundled with LEED EBOM certification, such as higher quality finishes and amenities, would result in the estimated effect suffering from a positive bias in energy consumption. Therefore, there is still substantial scope for studies that utilise panel and quasi-experimental methods to verify the existence of a green premium as well as demonstrate the benefits of green certification, if any [42].…”

Sustainable Built Environment and Its Implications on Real Estate Development: A Comprehensive Analysis

“…Advocates for high-efficiency, energy-optimized buildings have considerable obstacles in providing the economic justification necessary to encourage development and investment choices among stakeholders in the commercial real estate industry. In their scientific investigation, Zhu, Cindy, and their colleagues acknowledge that while renewable energy sources may need more significant initial investment, they consistently result in long-term financial benefits by reducing overall energy costs and improving the economic efficiency of buildings [9]. Although a growing amount of evidence highlights the improved financial performance of green buildings, including lower operational costs and additional benefits such as a better workplace environment and increased employee productivity, those who support green buildings still face a challenging task in convincingly proving these profit margins.…”