Green Noise or Green Value? Measuring the Effects of Environmental Certification on Office Values

TLDR

Price differences between certified and noncertified buildings are driven by additional occupier benefits, lower holding costs, and reduced risk premium. This study investigates the price effects of environmental certification on commercial real estate assets. Using hedonic regression on CoStar data, the study measures certification effects on rent and price. Eco‑certified buildings command higher rents and sale prices than comparable non‑certified buildings.

Abstract

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 noncertified buildings. These are additional occupier benefits, lower holding costs for investors and a lower risk premium. Drawing upon the CoStar database of U.S. 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.