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Determinants of premia for energy-efficient design in the office market

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  • Prashant Das
  • Jonathan A. Wiley

Abstract

This study explores the dynamic nature of premia for energy-efficient design in the market for office space. Stationary premia for Energy Star- and Leadership in Energy and Environmental Design (LEED)-certified property transactions are estimated at 16.4 and 10.6% respectively, on a price per square foot basis. We provide evidence to suggest that these premia should not be uniformly applied to all properties, but that adjustments should be made to account for individual property characteristics and changing market conditions. In particular, variance in the premia for Energy Star-labelled assets is consistent with expectations for the actual impact on operating expenses. Premia for LEED-certified properties are more responsive to the expected marketing benefits accrued by tenants. LEED premia are increasing with market acceptance during the sample period, rather than decreasing as the novelty effect expires. Investment in both categories of property with energy-efficient design is increasingly advantageous during periods when office market conditions have softened.

Suggested Citation

  • Prashant Das & Jonathan A. Wiley, 2014. "Determinants of premia for energy-efficient design in the office market," Journal of Property Research, Taylor & Francis Journals, vol. 31(1), pages 64-86, March.
    • Handle: RePEc:taf:jpropr:v:31:y:2014:i:1:p:64-86
    DOI: 10.1080/09599916.2013.788543
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    Cited by:

    1. Sylvain Chareyron, 2024. "The Valuation of Energy Efficiency Labels in the French Housing Market," TEPP Working Paper 2024-05, TEPP.
    2. Yana Akhtyrska & Franz Fuerst, 2021. "People or Systems: Does Productivity Enhancement Matter More than Energy Management in LEED Certified Buildings?," Sustainability, MDPI, vol. 13(24), pages 1-35, December.
    3. Prashant Das & Patrick Smith & Paul Gallimore, 2018. "Pricing Extreme Attributes in Commercial Real Estate: the Case of Hotel Transactions," The Journal of Real Estate Finance and Economics, Springer, vol. 57(2), pages 264-296, August.
    4. Carlos Marmolejo-Duarte & Ai Chen, 2019. "The Uneven Price Impact of Energy Efficiency Ratings on Housing Segments. Implications for Public Policy and Private Markets," Sustainability, MDPI, vol. 11(2), pages 1-23, January.
    5. Prescott C. Ensign & Shawn Roy & Tom Brzustowski, 2021. "Decisions by Key Office Building Stakeholders to Build or Retrofit Green in Toronto’s Urban Core," Sustainability, MDPI, vol. 13(12), pages 1-31, June.
    6. Copiello, Sergio, 2017. "Building energy efficiency: A research branch made of paradoxes," Renewable and Sustainable Energy Reviews, Elsevier, vol. 69(C), pages 1064-1076.
    7. Coën, Alain & Desfleurs, Aurélie, 2022. "The relative performance of green REITs: Evidence from financial analysts’ forecasts and abnormal returns," Finance Research Letters, Elsevier, vol. 45(C).
    8. Franz Fuerst & Ben Dalton, 2019. "Gibt es einen wissenschaftlichen Konsens zur Wirtschaftlichkeit nachhaltiger Immobilien? [Is there a scientific consensus on the economic viability of sustainable buildings?]," Zeitschrift für Immobilienökonomie (German Journal of Real Estate Research), Springer;Gesellschaft für Immobilienwirtschaftliche Forschung e. V., vol. 5(1), pages 173-191, November.
    9. Benedetto Manganelli & Pierluigi Morano & Francesco Tajani & Francesca Salvo, 2019. "Affordability Assessment of Energy-Efficient Building Construction in Italy," Sustainability, MDPI, vol. 11(1), pages 1-17, January.
    10. Florian Fizaine & Pierre Voye & Catherine Baumont, 2018. "Does the Literature Support a High Willingness to Pay for Green Label Buildings? An Answer with Treatment of Publication Bias," Revue d'économie politique, Dalloz, vol. 128(5), pages 1013-1046.
    11. Florian Fizaine Fizaine & Pierre Voye & Catherine Baumont, 2018. "Les études hédoniques soutiennent-elles une valeur verte élevée dans le bâtiment ? Une réponse par la méta-analyse," Post-Print halshs-01957447, HAL.
    12. Niina Leskinen & Jussi Vimpari & Seppo Junnila, 2020. "A Review of the Impact of Green Building Certification on the Cash Flows and Values of Commercial Properties," Sustainability, MDPI, vol. 12(7), pages 1-22, March.
    13. Julia Freybote & Hua Sun & Xi Yang, 2015. "The Impact of LEED Neighborhood Certification on Condo Prices," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 43(3), pages 586-608, September.

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