Does a Green-Certified Storefront Mean More Income? Estimating Financial Benefits of Certification for Space Users

Avis Devine and Qingqing Chang

ERES from European Real Estate Society (ERES)

Abstract: Much research has been completed on income and valuation premiums toowners and operators of sustainable and energy efficient (SEE) real estate.However, little work examines the financial benefit to the space users,outside of decreased operations costs in office space. As the retail industrybegins to adopt SEE certification, the implications for the space users are ofutmost interest, as retailers may be unwilling to pay a rental rate premiumfor SEE certified space if there is not a user benefit. Since location-specificbusiness income data is difficult to obtain, this research examines thequestion utilizing a novel proxy: retail bank branch deposits. Through anexamination of deposit growth, it is determined that LEED certified brancheshave not only an increased probability of above-market-rate deposit growth,but also experience notably higher year-over-year deposit growth. EnergyStar certification is also analyzed and found to offer little income-increasingbenefit to the space user. These results are tested in an event study whichvalidates the findings, and further indicates that the benefits of LEED extendyears past initial certification, indicating the lasting income-related benefitsof LEED certification for retail space users.

JEL-codes: R3 (search for similar items in EconPapers)
Date: 2016-01-01
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