The Operating Expense Puzzle of U.S. Green Office Buildings

Abstract

Cost savings from efficiency gains are at the core of the green building business case. Significantly lower energy bills are said to be a major factor in the green rent premium observed in earlier studies. Our study tests this relationship by inferring energy costs from operating expenses for a large dataset of U.S. office buildings and relating them to rental rates. We find that eco-certification is associated with a higher than anticipated total energy expenditure, which is the opposite of its expected effect. While our dataset does not contain a direct measure of actual energy consumption, this result puts the cost-saving argument into question. By contrast, we confirm earlier findings of a green rent premium but it might be an effect of factors unrelated to a tenant's operating expenses.