Friday, November 20, 2009

Eichholtz, Kok and Quigley find Economic Value from Green Buildings

This is forthcoming in AER:

This paper provides the first credible evidence on the economic value of the certification of green buildings-- value derived from impersonal market transactions rather thanengineering estimates. For some 10,000 subject and control buildings, we match publicly available information on the addresses of Energy Star and LEED-rated office buildings to the characteristics of these buildings, their rental rates and selling prices. We find that buildings with a green rating command rental rates that are roughly three percent higher per square foot than otherwise identical buildings - controlling for the quality and the specific location of office buildings. Ceteris paribus, premiums in effective rents are even higher - above six percent. Selling prices of green buildings are higher by about 16 percent. For the Energy-Star-certified buildings in this sample, we subsequently obtained detailed estimates of site and source energy usage from the U.S. Environmental Protection Agency. Our analysis establishes that variations in the premium for green office buildings are systematically related to their energy-saving characteristics. For example, an increase of ten percent in the site energy utilization efficiency of a green building is associated with a two percent increase in selling price - over and above the 16 percent premium for a labeled building. Further calculations suggest that a one dollar saving in energy costs from increased thermal efficiency yields roughly eighteen dollars in the increased valuation of an Energy-Star certified building.


I find the value results compelling; the rent results less so (the t-stat on their best specification is not that impressive given their large sample size). But in any event, an important contribution.

5 comments:

Anonymous said...

It is certainly interesting for me to read the post. Thanx for it. I like such themes and anything connected to this matter. I definitely want to read a bit more on that blog soon.

commercial real estate said...

its value is much high than the usual..

Rahat Ol ! said...
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Hakan Cetinsoy said...

It's an useful article. In addition lots of companies are working on new software to use all energy resources effectively like water, electric and gas etc. in office spaces. It's going to be help to save huge amount of money. Thanks for the blog post. Hakan Cetinsoy with Rofo.com

Jopseph Petter said...
This comment has been removed by the author.