How does environmental efficiency impact on the rents of commercial offices in the UK?

Abstract

The aim of this study is to investigate whether offices in the UK with an environmental label command price premiums when compared to non-labelled offices. The de facto standard for sustainability in the UK is the Building Research Establishment Environmental Assessment Method (BREEAM). BREEAM is a building quality indicator that investigates a range of environmental criteria, awards credits based on the degree to which these criteria are represented in a building and then awards a rating based on the total number of credits that have been achieved. This research investigates the effect of BREEAM ratings on observed contract rents in the UK and as such provides a potentially stronger empirical test of the hypothesis than previous appraisal-based studies. The market impact of BREEAM ratings is investigated, using a control sample of non-BREEAM-rated office buildings throughout the UK. To achieve this, a data set is used that contains 19,509 commercial office lease transactions that were completed from 2006 to 2010. The results indicate that a premium exists for BREEAM-certified buildings. The results also indicate that the premium shows variations during the study period and that premiums vary depending on the year of construction and certification.

Keywords:

• BREEAM
• hedonic modelling
• commercial office space
• eco-labelling

Acknowledgements

The authors are grateful for the support of staff at CoStar UK who supplied data and expertise for this paper.

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1. http://www.breeam.org/page.jsp?id = 559.

2. http://sd.defra.gov.uk/advice/public/buying/products/buildings/new-build/standards/.

3. http://wales.gov.uk/topics/sustainabledevelopment/design/standards/?lang = en.

4. http://www.dsdni.gov.uk/dsd-sustainable-development-action-plan.doc.

5. Walk Score ratings can be generated on: http://www.walkscore.com/.

6. These ratings can be found at: http://www.greenbooklive.com/search/scheme.jsp?id = 202.

7. http://www.walkscore.com/.

8. http://epp.eurostat.ec.europa.eu/portal/page/portal/region_cities/regional_statistics/data/main_tables.