Supreme Green: The Effect of LEED Certification Levels on Net and Gross Lease Rental Rates in Commercial Offices
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Authors
Govett, Chase
Murray, Max
Cook, Jackson
Issue Date
2020
Type
Presentation
Language
en_US
Keywords
Scholarship Sewanee 2020 , LEED certification , Sustainable buildings , Rental differences for comercial properties
Alternative Title
Abstract
LEED certification has generated significant attention from owners and developers in the U.S. commercial real estate sector over the last decade as these entities look to improve the operational efficiency of their buildings in an effort to become more sustainable. Several studies find a positive correlation among LEED certification and rental premiums. However, economists agree that it is difficult to rule out whether the price premium is a direct result of the certification or if it is a result of other characteristics such as differences in the lease contract, year built, and rentable building area. We include these characteristics in a model that estimates the effect of certification on rental premiums in the commercial office space market among a random cross-sectional sample of properties in Houston and Dallas/Fort-Worth. We find that buildings that are LEED-Silver or LEED-Gold certified command a significant rental premium compared to non certified buildings. However, LEED-Certified and LEED-Platinum certifications (unexpectedly) do not command a statistically significant premium. Our results are in line with previous findings with a few exceptions likely due to the different lease structures in our sample.
Description
Citation
Publisher
University of the South