Measuring the impact of energy certification on office prices in the UK

The aim of this research is to investigate whether intrinsically energy efficient offices in the United Kingdom command a price premium when compared to intrinsically energy inefficient offices that possess otherwise similar characteristics.Since October 2008 the energy efficiency of commercial office space in the United Kingdom has been assessed with Energy Performance Certificates (EPCs). An EPC is an asset rating that shows the intrinsic performance of a building on a scale that ranges from A to G, with A representing the most energy efficient buildings and G representing the most inefficient buildings. EPCs have been introduced as part of the European Energy Performance of Buildings Directive (EPBD). They are a requirement when a building is constructed, sold or let.It has often been suggested that there is or should be a pricing impact for energy efficient buildings, whereby the more efficient buildings command a premium compared to those that are energy inefficient, ceteris paribus. But many of the studies that have investigated or reviewed this claim have more often than not relied on anecdotal rather than empirical evidence to support their theories. Over the past few years however a number of studies have found a pricing impact for energy labels and green labels using more robust and larger datasets in the US.This paper looks at the pricing effect of an asset energy rating for a sample of 623 EPC rated office buildings in the UK. These ratings were obtained at the marketing stage of the building. We use information from CoStar UK on 3,456 achieved deals for these buildings as well as a set of building characteristics. Using hedonic regression analysis we investigate whether a pricing differential can be identified depending on the energy rating.Early results indicate that there is a trend towards a higher rent for energy efficiency. It is argued that the premium that an EPC commands could come directly from its use in marketing materials or indirectly from the rating as a potential indicator of building quality.