Green Noise or Green Value? Measuring the Price Effects of Environmental Certification in Commercial Buildings

Franz Fuerst and Patrick McAllister

MPRA Paper from University Library of Munich, Germany

Abstract: Evaluating the environmental performance of a building is rapidly gaining importance as a metric in real estate investments. Since interpretation of the technical measurements is difficult and requires high expertise, investors tend to rely on markers as provided by environmental certification standards instead of evaluating environmental performance directly. It is argued that there are likely to be three main drivers of price differences between certified and non-certified buildings. Drawing upon the CoStar database of US commercial real estate assets, hedonic regression analysis is used to measure the effect of certification on both rent and price. We first estimate the rental regression for a sample of 110 LEED and 433 Energy Star as well as several thousand benchmark buildings to compare the sample to. The results suggest that certified buildings have a rental premium. Furthermore, based on a sample of transaction prices for 292 Energy Star and 30 LEED-certified buildings, we find a price premium of 10% and 31% respectively.

Keywords: Green buildings; LEED; Energy Star certification; commercial real estate; appraisal; partial equilibrium; price premium; innovation diffusion (search for similar items in EconPapers)
JEL-codes: C31 C5 M2 O4 Q2 R33 (search for similar items in EconPapers)
Date: 2008-04, Revised 2008-09
New Economics Papers: this item is included in nep-env and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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https://mpra.ub.uni-muenchen.de/11446/1/MPRA_paper_11446.pdf original version (application/pdf)
https://mpra.ub.uni-muenchen.de/16625/9/MPRA_paper_16625.pdf revised version (application/pdf)

Related works:
Working Paper: Green Noise or Green Value? Measuring the Price Effects of Environmental Certification in Commercial Buildings (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:11446

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