Abstract

Research on climate change suggests that small improvements in the
“sustainability” of buildings can have large effects on greenhouse gas emissions and on
energy efficiency in the economy. This paper analyzes the economics of “green”
building. First, we analyze 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, we analyze 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, we relate 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.

Download File

Download a PDF (862KB)