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The impact of energy efficiency and green performance on the value of corporate real estate portfolios

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  • Ingrid Nappi-Choulet
  • Aurélien Decamps

Abstract

This article investigates the impact of energy efficiency on the economic value of existing buildings in a real estate investorís portfolio. The improvement of sustainability in real estate is largely supported by a reinforced regulation and the emergence of rating systems which certifies buildings for sustainability. However, it also allowed the actors to consider the potential value of sustainable buildings. Following this, a body of research studying ìgreen buildingsî has emerged. The potential value of green buildings is attributed to attractiveness for occupiers and decreased risk for investors. Several empirical works demonstrate that these advantages can turn into rental premium, higher occupancy rates and thus higher asset values. These works concern mainly U.S. buildings from the CoStar database which are certified Energy-Star or LEED and use hedonic regression modelling to estimate the impact of green labels on rent and sales prices. This highlights the interest to study the potential valuation of sustainable practices for existing buildings. The aim of this article is to contribute to the growing literature on ìgreen buildingsî by conducting a patrimonial approach using hedonic methods on a set of existing buildings. This approach is supported by a research convention which allows us to have access to a real estate investor portfolio including data on energy efficiency in the French context. The potential valuation of green performance on a portfolio of existing buildings is tested using hedonic regression modeling. The results emphasize a positive impact of energy efficiency which is capitalized into rent and asset value. This effect seems stronger for rent than for asset value and differs regarding buildingsí type.

Suggested Citation

  • Ingrid Nappi-Choulet & Aurélien Decamps, 2012. "The impact of energy efficiency and green performance on the value of corporate real estate portfolios," ERES eres2012_145, European Real Estate Society (ERES).
    • Handle: RePEc:arz:wpaper:eres2012_145
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    References listed on IDEAS

    as
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    JEL classification:

    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location

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