University of Cambridge > > Land Economy Seminar Series > Assessing the Financial Benefits of Eco-Labelling: Evidence from US Office Markets

Assessing the Financial Benefits of Eco-Labelling: Evidence from US Office Markets

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The central aim of the policy of environmental or energy labeling real estate assets is to reduce their environmental impact by altering patterns of demand and supply. By providing independently verified information to investors and occupiers about the environmental/energy performance of buildings, they potentially contribute to an increase in willingness-to-pay for buildings with superior environmental/energy performance. There is a body of literature that suggests that investors in and occupiers of eco-labeled buildings obtain a bundle of benefits related to lower operating costs, reputation benefits and productivity. The research we present in this talk investigates the effect of eco-labeling on rental rates, sale prices and occupancy rates. 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 of commercial office buildings in the US. The results suggest that offices with Energy Star or LEED eco-labels obtain rental premiums of approximately 3-5%. Dual certification produces an additive effect with rental premiums estimated at 9%. Respective sale price premiums of 18% and 25% are estimated for Energy Star and LEED labeled offices. The sale price premium for dual certification is estimated at 28-29%. A significant negative occupancy premium is estimated for LEED labeled offices and a small positive occupancy premium is estimated for Energy Star labeled offices.

This talk is part of the Land Economy Seminar Series series.

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