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Greener buildings attract higher premiums in USA

Tuesday, 31 March 2009 9:52 AM

Buildings in the US with a high energy star rating are receiving higher rental premiums than non-green buildings, according to research released today by the Royal Institution of Chartered Surveyors (Rics).

The research, 'Doing Well by Doing Good?', provides the first evidence on the economic value of the certification of 'green buildings' in the commercial sector, and concludes there is a premium of three per cent for the green building rents.

The Rics research also found when looking at effective rents, those being the true rent of a property considering rental concessions and spread over the life of the lease, the premium is above six per cent.

Simon Rubinsohn, Rics chief economist, said: "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to the savings they can make and the higher rental yields they attract, non-green buildings will eventually become an outdated model."

The researchers were also able to look at the impact on the selling prices of green buildings, with the premium in the order of 16 per cent. Rics said this implies upgrading to the average non-green building to a green one would increase its capital value by some $5.5 million.

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

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