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More Than a Green Certificate: Green Leases and Investment Return in Commercial Real Estate

Author

Listed:
  • Konrad Hedemann
  • Bing Zhu
  • Werner Lang

Abstract

Green leases in commercial real estate have gained widespread attention from real estate investors in recent years. As an appendix to the lease contract, a green lease is designed to reduce energy consumption in buildings and ensure compliance with climate targets in their markets. Using a unique database, we study 7,246 leases in 376 commercial assets to determine whether green leases lead to higher investment returns. Using a propensity score matching method, we find significant green lease premiums on investment returns in commercial assets. A 1% increase in green leases raises the rent by 0.23% and the net asset value by 0.38%, and decreases the operational expenditure ratio by 0.02% on average. The highest premiums were observed in Germany, with increases in rent of 0.40%, and in France, where the net asset value increased by 0.56%. The highest premium on leakage was 0.02%, in Germany, and the highest premium on yield was -0.01% in France.

Suggested Citation

  • Konrad Hedemann & Bing Zhu & Werner Lang, 2022. "More Than a Green Certificate: Green Leases and Investment Return in Commercial Real Estate," ERES 2022_127, European Real Estate Society (ERES).
    • Handle: RePEc:arz:wpaper:2022_127
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    File URL: https://eres.architexturez.net/doc/eres-id-eres2022-127
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    More about this item

    Keywords

    commercial real estate; Green Leases; investment return; Tenant Engagement;
    All these keywords.

    JEL classification:

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

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