(E3 ) Working Papers Series
E3 Working Paper WP-002 Abstract
WP-002: Piet Eichholtz, Nils Kok and John M. Quigley, "The Economics of Green Building" (January 2011) Full Paper
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 anaylzes 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 value are substantial. Third, we relate the economic premiums for green buildings to their sustainability, confirming 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.