Green Premium in the Tokyo Office Rent Market

Junichiro Onishi,Chihiro Shimizu,Yongheng Deng

doi:10.3390/su132112227

Junichiro Onishi, Chihiro Shimizu + Show 1 more

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https://doi.org/10.3390/su132112227

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Abstract

More than 10 years have passed since studies on green buildings gained attention in the academic and industrial literature. Many studies report the economic value of green buildings, mainly in the U.S. and European markets. An empirical clarification of the dynamics of green premiums has significant implications for future urban sustainability. This study constructed a dataset of Tokyo office rents from 2009 to 2019. We estimated the green office rental premium using a hedonic approach. Our results show that, on average, an office property with a green label gains a premium of approximately 6.5% on contract rents. The Tokyo office market is heterogeneous, and endogeneity is an issue when identifying the green premium. We addressed the endogeneity issue with propensity score clustering. As a result of our estimation, the premium was approximately +5.4% for medium-sized old buildings and +2.6% for large-sized new buildings.

Highlights

Wisconsin School of Business, University of Wisconsin-Madison, Madison, WI 53706, USA; Center for Spatial Information Science, The University of Tokyo, Chiba 277-8568, Japan; Abstract: More than 10 years have passed since studies on green buildings gained attention in the academic and industrial literature
When we controlled for the building dummy instead of the characteristics and location dummy, the estimate for green premium was +0.0148 and its standard error was +0.0337, which is not significant
This study empirically estimated the green premium in the Tokyo office market, a large, heterogeneous market with advanced environmental technology

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Introduction

Wisconsin School of Business, University of Wisconsin-Madison, Madison, WI 53706, USA; Center for Spatial Information Science, The University of Tokyo, Chiba 277-8568, Japan; Abstract: More than 10 years have passed since studies on green buildings gained attention in the academic and industrial literature. Research results on the green premium of rent have accumulated, and many studies have reported positive premiums [7,8,9,10] Most of these studies are in the US office market where data are available. Shimizu’s findings are further verified by Yoshida and Sugiura [13] and Fuerst and Shimizu [14] These studies echo the literature on green premiums documented in the residential property markets in other countries [15,16,17,18,19,20,21,22]. We verify whether there is a significant premium from green labels for new contract rents, using a valuable dataset consisting of 37,346 rental properties in Tokyo’s office market. Publisher’s Note: MDPI stays neutral with regard to jurisdictional claims in published maps and institutional affiliations

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