By Jodi Summers
Tests have proven, they are sexier. A posse of professors from Holland and U.C. Berkley posed the question – “What do commercial investors value in real estate?” The conclusion is that U.S. green buildings that throw around names like LEED, Energy Star (and now CalGreen) are able to charge 3% higher rent, have greater occupancy rates, and sell for 13% more than comparable properties.
The study, a comprehensive statistical analysis on the relative value of green and conventional buildings from Dutch economist Nils Kok concludes, “Labeled buildings have effective rents [rent multiplied by occupancy rate] that are almost 8% higher than those of otherwise identical nearby non-rated buildings.”
Kok and his University of Maastricht colleague, Piet Eichholtz, working with John Quigley of the University of California–Berkeley obtained data on nearly 2,700 buildings that were certified or pursuing certification through LEED or Energy Star. Of those, 1,943 were rental properties and 744 buildings offered sales figures. The study matched each green property with conventional office buildings within one-quarter mile using the CoStar database of commercial real-estate information, and corrected for variables such as age, size, quality, and number of stories, date of last renovation, the presence of onsite amenities, and proximity to public transport. In total they analyzed nearly 27,000 buildings.
The report concluded that “Energy represents about 30% of operating expenses in the typical office building in the U.S.” and is “the single largest and most manageable expense in the provision of office space.”
The researchers also looked at the interaction between LEED and Energy Star ratings. They found that the benefits of energy efficiency and LEED’s broader sustainability metrics are both “fully capitalized into rents and asset values.”
One set of buildings the team used for the calculations had been previously studied in 2007. It was noted that neither the recession nor the dramatic increase in the number of green projects had a significant impact on lease and sale premiums for those buildings.
The study suggests that any additional costs to go green turn out to be lower than the upside in value.
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