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

Konrad Hedemann, Bing Zhu and Werner Lang

ERES from European Real Estate Society (ERES)

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.

Keywords: commercial real estate; Green Leases; investment return; Tenant Engagement (search for similar items in EconPapers)
JEL-codes: R3 (search for similar items in EconPapers)
Date: 2022-01-01
New Economics Papers: this item is included in nep-ene, nep-env and nep-ure
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Persistent link: https://EconPapers.repec.org/RePEc:arz:wpaper:2022_127

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