The effect of LEED certification on Shanghai’s prime office rental value

Abstract

Purpose – This study aims to examine whether Leadership in Energy and Environmental Design (LEED) certification yields additional premiums for Shanghai’s office rental sector. Design/methodology/approach – The hedonic model is utilized to evaluate the impact of LEED, as well as of other factors, on the rental values of 59 Grade A office buildings in Shanghai, including 23 LEED-certified buildings and 36 non-LEED-certified buildings. Findings – It is found that rental values of buildings with LEED are about 12.8 per cent than those of buildings without the same certification. Other factors, for instance accessibility to facilities such as subway station and 4-star hotels, the availability of catering services in surrounding areas as well as the building’s location (i.e. inside the CBD) also are significantly positively correlated with office rents in the sample commercial buildings. Originality/value – Besides being one of the earlier contributions to the literature with regard to the study of the impact of green certifications in China’s office market, the findings in this study also provide some empirical evidence for stakeholders, such as developers, investors, property managers and market practitioners, to evaluate the introduction of green features (and/or green certifications such as LEED) as an investment decision.

Environmental Certification Schemes and Property Values: Evidence From the Hong Kong Prime Commercial Office Market

“…Nevertheless, comprehensive studies on green certification schemes of commercial properties in Asia have been limited to general discussion, except for one recent study focussed on the Shanghai office rental market (i.e. Hui, Chan, & Yu, 2015). Their results, in line with western studies, suggest that office properties certified by LEED are 12.8% more valued than those of properties without LEED certification.…”

“…To examine the financial implications of BEAM, BEAM Plus and LEED certifications on the value of rental office space in Hong Kong, the study deployed a hedonic price model through a fixed effects approach. Despite some weaknesses (assumptions), the hedonic model (HPM) is regarded as an effective tool in the area of property valuation analysis (Hui et al, 2015;Hui, Tse, & Yu, 2017). For example, using HPM, the effects of structural attributes such as floor area, age and size of the unit, etc.…”

Metodología gerencial para facility management ambientalmente sostenible en Bogotá D. C.

“…Históricamente, se han enfrentado dos términos: el desarrollo económico y la protección al medio ambiente, que a primera vista parecen ser opuestos: para lograr uno habría que sacrificar el otro. Sin embargo, existe un enfoque llamado desarrollo sostenible que estudia cómo proceder con el desarrollo económico sin causar daños en el medio ambiente (Chi-man et al, 2015).…”

“…Las instalaciones que aplican adecuaciones amigables con el medio ambiente, como la certificación de edificios sostenibles LEED (leadership in energy & environmental design) obtienen un arrendamiento de mayor valor que instalaciones que no tienen en cuenta estas mejoras. Además, esta práctica sirve como estrategia de marketing para mejorar la imagen corporativa del edificio (Chi-man et al, 2015).…”

“…Esta conciencia de las partes interesadas (accionistas, gobierno, cliente, proveedores) por el medio ambiente ha presionado a las empresas a ser más responsables con este tema (Chi-man et al, 2015).…”