Why Act 'Green'?

Abstract

Over the last couple of years, there has been a growing interest in the financial performance of green buildings. Past research results indicate that green buildings are able to realise higher rents and sustain higher occupancy rates compared to other (non-green) buildings. It is argued that these findings are explained by the (supposed) additional occupier benefits of green buildings, such as lower operating costs, improved employee productivity and image benefits. However, in many studies it remains unclear which motive primary drives office users to prefer green buildings. Furthermore, the reported results -- the percentage rent increase and occupancy rates -- deviate to a large extent, while comparable methods and data sets are used.The aim of this research is two-folded. First, it strives to formulate a model of corporate real estate ecological responsiveness. What are the main motives of firms to lease or buy green buildings? Second, different hedonic model specifications and estimation techniques are compared to achieve insight in which hedonic model technique provides the most credible results regarding the price effects of green buildings. The relative large deviations, and sometimes implausible signs, in the reported results of the various hedonic price studies, might indicate that in some cases the models suffer from misspecification. Possibly resulting in an over- or underestimation of the rent price and occupancy effects related to green buildings.This research combines various research methods to achieve both research aims. First, a meta-analysis of published green hedonic office price is performed. Whereby special attention is given to the model specification and estimation methods. Second, an hedonic office price study is performed for the Randstad agglomeration -- Amsterdam, Rotterdam, Utrecht and The Hague -- that compares different plausible model specifications. Finally, the hedonic study is followed up by interviewing office tenants to derive their motivation for choosing green buildings.