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How does environmental efficiency impact on the rents of commercial offices in the UK?

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  • Franz Fuerst
  • Jorn van de Wetering

Abstract

The aim of this study is to investigate whether offices in the UK with an environmental label command price premiums when compared to non-labelled offices. The de facto standard for sustainability in the UK is the Building Research Establishment Environmental Assessment Method (BREEAM). BREEAM is a building quality indicator that investigates a range of environmental criteria, awards credits based on the degree to which these criteria are represented in a building and then awards a rating based on the total number of credits that have been achieved. This research investigates the effect of BREEAM ratings on observed contract rents in the UK and as such provides a potentially stronger empirical test of the hypothesis than previous appraisal-based studies. The market impact of BREEAM ratings is investigated, using a control sample of non-BREEAM-rated office buildings throughout the UK. To achieve this, a data set is used that contains 19,509 commercial office lease transactions that were completed from 2006 to 2010. The results indicate that a premium exists for BREEAM-certified buildings. The results also indicate that the premium shows variations during the study period and that premiums vary depending on the year of construction and certification.

Suggested Citation

  • Franz Fuerst & Jorn van de Wetering, 2015. "How does environmental efficiency impact on the rents of commercial offices in the UK?," Journal of Property Research, Taylor & Francis Journals, vol. 32(3), pages 193-216, September.
    • Handle: RePEc:taf:jpropr:v:32:y:2015:i:3:p:193-216
    DOI: 10.1080/09599916.2015.1047399
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    References listed on IDEAS

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    1. David E. Giles, 2011. "Interpreting Dummy Variables in Semi-logarithmic Regression Models: Exact Distributional Results," Econometrics Working Papers 1101, Department of Economics, University of Victoria.
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    1. Bienert, Sven, . "METASTUDIE :NACHHALTIGKEIT CONTRA RENDITE? Die Implikationen nachhaltigen Wirtschaftens für offene Immobilienfonds am Beispiel der Deka Immobilien Investment GmbH und der WestInvest GmbH," Beiträge zur Immobilienwirtschaft, University of Regensburg, Department of Economics, number 14, August.
    2. Martijn (M.I.) Droes & Boris Ziermans & Philip Koppels, 2017. "Information Asymmetry, Lease Incentives, and the Role of Advisors in the Market for Commercial Real Estate," Tinbergen Institute Discussion Papers 17-106/IV, Tinbergen Institute.
    3. Zhengzhen Tan & Siqi Zheng & Juan Palacios & Carl Hooks, 2021. "Market Adoption of Healthy Buildings in the Office Sector: A Global Study from the Owner's Perspective," International Real Estate Review, Global Social Science Institute, vol. 24(2), pages 253-292.
    4. Gui, Xuechen & Gou, Zhonghua, 2021. "Understanding green building energy performance in the context of commercial estates: A multi-year and cross-region analysis using the Australian commercial building disclosure database," Energy, Elsevier, vol. 222(C).
    5. 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.
    6. 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.
    7. Zhang, Jia Jasmine & Ward, Hauke & Qian, Queena, 2024. "The spatial dynamics of energy efficiency: EPC impact on retail property values," Energy Policy, Elsevier, vol. 195(C).
    8. Akhtyrska, Yana & Fuerst, Franz, 2024. "The effectiveness of climate change regulations in the commercial real estate market," Energy Policy, Elsevier, vol. 185(C).
    9. Odilon Costa & Franz Fuerst & Spenser Robinson & Wesley Mendes-da-Silva, 2017. "Are Green Labels More Valuable in Emerging Real Estate Markets?," LARES lares_2017_paper_5, Latin American Real Estate Society (LARES).

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