The Economics of Green Building

The paper analysed changes in rents between 2007 and 2009 for office buildings that were already certified as energy efficient or sustainable by one of the two major rating agencies -- the U.S. Green Building Council and EPA’s Energy Star in 2007, compared to buildings that were never certified.

First, it analyses a panel of office buildings certified by independent rating agencies, finding that large recent increases in the supply of green buildings and the unprecedented volatility in property markets have not significantly affected the relative returns to green buildings.

Second, it analyzes a large cross section of office buildings, demonstrating that economic premiums in rent and asset values of buildings certified for energy efficiency are substantial. Third, it relates the economic premiums for green buildings to their relative efficiency in energy use, documenting that the attributes rated for both thermal efficiency and sustainability contribute to premiums in rents and asset values. Even among green buildings, increased energy efficiency is fully capitalized into rents and asset values.

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