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Press Release

Green buildings attracting higher rents in US

31 March 2009

Doing Well by Doing Good? An analysis of the financial performance of green office buildings in the USA.

Buildings in the US with a high Energy Star rating are attracting rental premiums of three percent per square foot compared with non-green buildings of the same size, location and function, according to new research commissioned by RICS (Royal Institution of Chartered Surveyors).

The research "Doing Well by Doing Good?" provides the first credible evidence on the economic value of the certification of "green buildings" in the commercial sector and concludes that there is a premium of three percent for the rents that 'green' buildings with the Energy Star rating can command. In addition when looking at effective rents (the true rent of a property, considering rental concessions, spread over the life of the lease) the premium is higher still, above six percent.

The researchers were also able to look at the impact on the selling prices of green buildings, and here the premium is even higher, in the order of 16 percent. This implies that upgrading the average non-'green' building to a 'green' one would increase its capital value by some $5.5 million.

The results suggest that tenants and investors at this point are willing to pay more for an energy-efficient building, but not for buildings that are "sustainable" in a broader sense.

Simon Rubinsohn, RICS Chief Economist comments:

"This piece of research is an important first step in building an evidence base on the topic of the value of "green" buildings. Previously with only anecdotal evidence available on which to base decisions surrounding development of energy efficient buildings, it is understandable that the uptake of some measures has been frustratingly slow.

"With more comprehensive evidence based research, such as this paper, the economic argument for having an energy efficient building will be strong. Any businesses wishing to maximise profits will have to start looking at increasing the energy efficiency of the buildings in order to remain competitive. By proving that green buildings are economically beneficial due to the savings they can make and the higher rental yields they attract, non-green buildings will eventually become an outdated model."



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Royal Institution of Chartered Surveyors

Royal Institution of Chartered Surveyors

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