A Global Perspective On The Value Of Green Buildings

Capital investments in energy efficiency in the built environment are a cost-effective manner to achieve substantial reductions in current carbon emissions. In fact, improvements in the energy-efficiency or sustainability of buildings have been shown to lead to positive financial returns. Attention to green building practices has substantially increased over the last decade, but more research is needed on the actual costs and benefits of implementing energy efficiency measures into buildings. Moreover, evidence on financial performance of such investments is limited outside of the U.S. To fill this gap in the literature, this study investigates the financial implications of green building practices in the United Kingdom, the second largest property market worldwide. The United Kingdom was the first to introduce a formal green building rating scheme in 1990 ñ BREEAM. This rating scheme laid the foundation for the development of rating schemes such as LEED, which is promoted by the U.S. Green Building Council and GreenStar in Australia. We match proprietary information on the addresses of BREEAM rated office buildings, made available to us by BRE, to the characteristics of geographically nearby control buildings, their rental rates and selling prices. This results in a dataset of approximately 7,000 subject and control buildings. We then model the characteristics of green buildings that impact price, occupancy rates and rental performance, controlling for differences in quality between subject and control buildings using a hand-collected set of hedonic characteristics. Initial results from this analysis suggest a positive impact of a buildingís green characteristics on rents and sales transaction prices.