Eco-Labeling, Rents, Sales Prices and Occupancy Rates: Do LEED and Energy Star Labeled Offices Obtain Multiple Premiums?

Franz Fuerst, Pat McAllister () and Karen Smith
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Pat McAllister: School of Real Estate & Planning, Henley Business School, University of Reading
Karen Smith: School of Real Estate & Planning, Henley Business School, University of Reading

Real Estate & Planning Working Papers from Henley Business School, University of Reading

Abstract: Drawing upon an updated and expanded dataset of Energy Star and LEED labeled commercial offices, this paper investigates the effect of eco-labeling on rental rates, sale prices and occupancy rates. Using OLS and robust regression procedures, hedonic modeling is used to test whether the presence of an eco-label has a significant positive effect on rental rates, sale prices and occupancy rates. The study suggests that estimated coefficients can be sensitive to outlier treatment. For sale prices and occupancy rates, there are notable differences between estimated coefficients for OLS and robust regressions. The results suggest that both Energy Star and LEED offices obtain rental premiums of approximately 3%. A 17% sale price premium is estimated for Energy Star labeled offices but no significant sale price premium is estimated for LEED labeled offices. Surprisingly, no significant occupancy premium is estimated for Energy Star labeled offices and a negative occupancy premium is estimated for LEED labeled offices.

Pages: 24 pages
Date: 2010
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