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New Evidence on the Green Building Rent and Price Premium

Author

Listed:
  • Franz Fuerst

    () (School of Real Estate & Planning, University of Reading Business School)

  • Patrick McAllister

    () (School of Real Estate & Planning, University of Reading)

Abstract

This paper investigates the effect of voluntary eco-certification on the rental and sale prices of US commercial office properties. Hedonic and logistic regressions are used to test whether there are rental and sale price premiums for LEED and Energy Star certified buildings. The results of the hedonic analysis suggest that there is a rental premium of approximately 6% for LEED and Energy Star certification. A sale price premium of approximately 35% was found for 127 price observations involving LEED rated buildings and 31% for 662 buildings involving Energy Star rated buildings. When compared to samples of similar buildings identified by a binomial logistic regression for LEED-certified buildings, the existence of a rent and sales price premium is confirmed albeit with differences regarding the magnitude of the premium. Overall, the results of this study confirm that LEED and Energy Star buildings exhibit higher rental rates and sales prices per square foot controlling for a large number of location- and property-specific factors.

Suggested Citation

  • Franz Fuerst & Patrick McAllister, 2009. "New Evidence on the Green Building Rent and Price Premium," Real Estate & Planning Working Papers rep-wp2009-07, Henley Business School, Reading University.
  • Handle: RePEc:rdg:repxwp:rep-wp2009-07
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    File URL: http://www.henley.reading.ac.uk/rep/fulltxt/0709.pdf
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    Cited by:

    1. Tessa Hebb & Ashley Hamilton & Heather Hachigian, 2010. "Responsible Property Investing in Canada: Factoring Both Environmental and Social Impacts in the Canadian Real Estate Market," Journal of Business Ethics, Springer, vol. 92(1), pages 99-115, April.
    2. Alexander Reichardt, 2014. "Operating Expenses and the Rent Premium of Energy Star and LEED Certified Buildings in the Central and Eastern U.S," The Journal of Real Estate Finance and Economics, Springer, vol. 49(3), pages 413-433, October.
    3. Florian Fizaine & Pierre VoyŽ & Catherine Baumont, 2017. "Does the literature support a high willingness to pay for green label buildings? An answer with treatment of publication bias," Policy Papers 2017.03, FAERE - French Association of Environmental and Resource Economists.
    4. Nils Kok & Marquise McGraw & John Quigley, 2012. "The diffusion over time and space of energy efficiency in building," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 48(2), pages 541-564, April.

    More about this item

    JEL classification:

    • R33 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial 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
    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy
    • M2 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics
    • C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models
    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling

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