Green Noise or Green Value? Measuring the Price Effects of Environmental Certification in Commercial Buildings

Fuerst, Franz and McAllister, Patrick (2008): Green Noise or Green Value? Measuring the Price Effects of Environmental Certification in Commercial Buildings. Unpublished.

Abstract

The environmental performance of a building is rapidly gaining importance as a metric in real estate investments. This study investigates the price effects of environmental certification on commercial real estate assets. It is argued that there are likely to be three main drivers of price differences between certified and non-certified buildings. These are additional occupier benefits, lower holding costs for investors and a lower risk premium. Drawing upon the CoStar database of US commercial real estate assets, hedonic regression analysis is used to measure the effect of certification on both rent and price. The results suggest that, compared to buildings in the same submarkets, eco-certified buildings have both a rental and sale price premium.

• Item Type: MPRA Paper
• Language: English
• Keywords: Green buildings, LEED, Energy Star certification, commercial real estate, appraisal, price premium, innovation diffusion
• Subjects: C - Mathematical and Quantitative Methods > C5 - Econometric Modeling; C - Mathematical and Quantitative Methods > C3 - Econometric Methods: Multiple; Simultaneous Equation Models; Multiple Variables; Endogenous Regressors > C31 - Cross-Sectional Models; Spatial Models; Treatment Effect Models; M - Business Administration and Business Economics; Marketing; Accounting > M2 - Business Economics; O - Economic Development, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity; R - Urban, Rural, and Regional Economics > R3 - Production Analysis and Firm Location > R33 - Nonagricultural and Nonresidential Real Estate Markets; Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics > Q2 - Renewable Resources and Conservation

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