Does energy efficiency affect commercial real estate rents? An empirical study of UK office buildings

Qiulin Ke and Michael White

ERES from European Real Estate Society (ERES)

Abstract: With buildings accounting for 40% of the UK carbon footprint, environmental issues are becoming a significant focus for the commercial property industry. Since 2007 almost all units marketed for sale or lease have been required to exhibit an Energy Performance Certificate providing a rating of the energy efficiency of the unit from A (very efficient) to G (least efficient) as assessed by a specialist surveyor. However, there has been no consensus in the academic literature that energy efficiency is associated with higher transaction values and rents. But whether the behaviour of investors and tenants have changed due to the pressure of climate change. In this study, using a unique data set of existing office property rents and energy efficiency rating across the UK in 2021, we did not find that a better rating automatically gives rise to a higher rent. Other factors obviously come in to play too - for example, how recently the building may have been refurbished, other services the building provides such as a food service, bicycle shed, etc. The data also revealed that buildings with lower ratings commanded a higher rent than those with a superior EPC rating.

Keywords: Energy Performance Certificate (EPC); Office Building; Office Rent; UK (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-eff, nep-ene and nep-ure
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Persistent link: https://EconPapers.repec.org/RePEc:arz:wpaper:2022_94

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