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Doing Well by Doing Good? Green Office Buildings

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  • Piet Eichholtz
  • Nils Kok
  • John M. Quigley

Abstract

This paper provides the first credible evidence on the economic value of "green buildings" derived from impersonal market transactions rather than engineering estimates. We analyze clusters of certified green and nearby buildings, establishing that "rated" buildings command substantially higher rents and selling prices than otherwise identical buildings. Variations in premiums are systematically related to energy-saving characteristics. Increased energy efficiency is associated with increased selling prices -- beyond the premiums paid for a labeled building. Evidence suggests that the intangible effects of the label itself may also play a role in determining the values of green buildings in the marketplace. (JEL G31, M14, Q52, R33)

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Bibliographic Info

Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 100 (2010)
Issue (Month): 5 (December)
Pages: 2492-2509

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Handle: RePEc:aea:aecrev:v:100:y:2010:i:5:p:2492-2509

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  1. Piet Eichholtz & Nils Kok & John M. Quigley, 2013. "The Economics of Green Building," The Review of Economics and Statistics, MIT Press, vol. 95(1), pages 50-63, March.
  2. John L. Glascock & Shirin Jahanian & C. F. Sirmans, 1990. "An Analysis of Office Market Rents: Some Empirical Evidence," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 18(1), pages 105-119.
  3. Webb, R. Brian & Fisher, Jeffrey D., 1996. "Development of an Effective Rent (Lease) Index for the Chicago CBD," Journal of Urban Economics, Elsevier, vol. 39(1), pages 1-19, January.
  4. Maxwell, John W & Lyon, Thomas P & Hackett, Steven C, 2000. "Self-Regulation and Social Welfare: The Political Economy of Corporate Environmentalism," Journal of Law and Economics, University of Chicago Press, vol. 43(2), pages 583-617, October.
  5. V. Öven & Dilek Pekdemir, 2006. "Office Rent Determinants Utilising Factor Analysis—A Case Study for İstanbul," The Journal of Real Estate Finance and Economics, Springer, vol. 33(1), pages 51-73, August.
  6. Klein, Benjamin & Leffler, Keith B, 1981. "The Role of Market Forces in Assuring Contractual Performance," Journal of Political Economy, University of Chicago Press, vol. 89(4), pages 615-41, August.
  7. Milgrom, Paul & Roberts, John, 1986. "Price and Advertising Signals of Product Quality," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 796-821, August.
  8. David P. Baron, 2001. "Private Politics, Corporate Social Responsibility, and Integrated Strategy," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 10(1), pages 7-45, 03.
  9. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-38, May.
  10. Eichholtz, Piet & Kok, Nils & Quigley, John M., 2010. "Why Do Companies Rent Green? Real Property and Corporate Social Responsibility," Berkeley Program on Housing and Urban Policy, Working Paper Series qt7br1062q, Berkeley Program on Housing and Urban Policy.
  11. Gunnelin, Ake & Soderberg, Bo, 2003. "Term Structures in the Office Rental Market in Stockholm," The Journal of Real Estate Finance and Economics, Springer, vol. 26(2-3), pages 241-65, March-May.
  12. Sivitanidou Rena, 1995. "Urban Spatial Variations in Office-Commercial Rents: The Role of Spatial Amenities and Commercial Zoning," Journal of Urban Economics, Elsevier, vol. 38(1), pages 23-49, July.
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