Green Office Buildings Command Higher Price: C&W

USA – A research by Cushman & Wakefield (C&W) shows that LEED-certified Grade A office buildings in cities command a 25.3 percent premium in their psf price as compared to non-certified similar buildings, reported The Boston Business Journal on Thursday morning (6 January, SGT).

As for such office building in the suburbs, these are 40.9 percent pricier than similar buildings in the same area. The building’s age and quality were kept constant in the study.

In terms of office rents, a separate study by CoStar shows that green-certified office fetched higher rents. In this research, building quality was kept constant.

In particular, CoStar found out that office buildings rated 3 to 5 stars in urban submarkets and were constructed or renovated since 2000, those with LEED certification have command a rental premium of over 40 percent as of Q3 2021, from just 26 percent in 2018.

“For urban business districts, or (central business districts), the rent premium is somewhat lower at 25 percent, while it is in the mid-40 percent range in further-out urban areas,” commented Nancy Muscatello, Managing Consultant at CoStar Advisory Services.

“We attribute the lower premium for urban business districts to the overall higher quality of non-LEED properties in these premier areas.”

CoStar think that the price and rental gap between LEED and non-LEED buildings will likely rise in the present environment, as tenants now have more options and are now more sustainability-conscious.

“The increased focus on ESG-related issues is expected to accelerate the shift to a more sustainable and energy-efficient office environment,” noted Muscatello.

“Furthermore, tenants have a lot of choices in the office market today and those assets that address concerns around health and sustainability, and are in desirable locations, should continue to maintain, or even grow, their green advantage in the coming years.”