What’s the premium for a green building?
A systemic study on the financial performance of green buildings reveals that green office buildings have higher market value than uncertified buildings.
Source and Photo: Royal Institution of Chartered Surveyors -- Consulting-Specifying Engineer, 4/2/2009 3:44:00 PM
The Royal Institution of Chartered Surveyors (RCIS) announced the first study on the financial performance of green office buildings in the U.S. The survey was conducted by Piet Eichholtz and Nils Kok from the University of Maastricht, Netherlands, and John Quigley of the University of California-Berkeley. The study evaluates the financial benefits of investing in green buildings that meet LEED and/or Energy Star requirements.
“Doing well by doing good?” An analysis of the financial performance of green office buildings in the USA is a 48-page report that claims to offer systematic evidence on the economic benefits of green buildings. For each commercial building the U.S. that obtained a LEED and/or Energy Star label, the researchers identified a control group consisting of all commercial properties located within 1,300 ft.
The LEED or Energy Star labels also effect how potential value of the building. The study indicates that tenants and investors will be willing to pay more for an energy-efficient building, but not for a building advertised as sustainable.
The study discovered that buildings certified green can significantly impact market rents and values of commercial space. The study revealed that building with the green certification rent for roughly 3% more per sq ft with the difference in effective rent estimated at about 6% per sq ft. The increment to the selling price may reach as high as 16%.
According to the study, average effective rent for the 7,488 control buildings in the sample of rental office buildings is $23.51 per sq ft. For the average size of these buildings, the estimated annual rent increment for a green building is approximately $329,000. At prevailing capitalization rates of 6%, the incremental value of a green building is estimated to be about $5.5 million more than the value of a comparable unrated building nearby.
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