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Green Noise or Green Value? Measuring the Price Effects of Environmental Certification in Commercial Buildings

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Author Info
Fuerst, Franz
McAllister, Patrick

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Abstract

The environmental performance of a building is rapidly gaining importance as a metric in real estate investments. This study investigates the price effects of environmental certification on commercial real estate assets. It is argued that there are likely to be three main drivers of price differences between certified and non-certified buildings. These are additional occupier benefits, lower holding costs for investors and a lower risk premium. Drawing upon the CoStar database of US commercial real estate assets, hedonic regression analysis is used to measure the effect of certification on both rent and price. The results suggest that, compared to buildings in the same submarkets, eco-certified buildings have both a rental and sale price premium.

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File URL: http://mpra.ub.uni-muenchen.de/11446/
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File URL: http://mpra.ub.uni-muenchen.de/16625/
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Publisher Info
Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 11446.

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Date of creation: Apr 2008
Date of revision: Sep 2008
Handle: RePEc:pra:mprapa:11446

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Related research
Keywords: Green buildings; LEED; Energy Star certification; commercial real estate; appraisal; price premium; innovation diffusion;

Other versions of this item:

Find related papers by JEL classification:
C5 - Mathematical and Quantitative Methods - - Econometric Modeling
C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
M2 - Business Administration and Business Economics; Marketing; Accounting - - Business Economics
O4 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
R33 - Urban, Rural, and Regional Economics - - Production Analysis and Firm Location - - - Nonagricultural and Nonresidential Real Estate Markets
Q2 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation

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