ROI: Increasing asset values
Owners and developers are interested in the financial upsides to high-performance design. One key measure is “asset value.” Asset value is commonly perceived as market value, meaning what a property would sell for based on the local real estate market and specific features of a property. Both green labeling and operational cost reductions boost a property’s marketability and asset value.
Literature review completed by University of Washington’s Integrated Design Lab for AIA in 2020.
Green labels and certifications (e.g., LEED, WELL, Living Building Challenge) can improve a property’s marketability and desirability. According to European researchers, the economic advantages of green buildings include their “longer economic lives, lower marketability risk, and lower risk of technical and regulatory obsolescence.”1
Key green labeling talking points:
- LEED certification has several levels, from certified to platinum. There is “an average 3% increase in rent for each increase in certification level”.2
- Green buildings can sell for 16% more than conventional buildings.3
- LEED buildings have a 4.1% higher occupancy rate than noncertified buildings, and Energy Star buildings have a 3.6% higher occupancy rate.4
- Keeping quality and class constant, LEED-certified Class A urban office sales generated a 25.3% price per square foot premium over non-certified buildings, while LEED-certified Class A suburban office achieved a 40.9% premium over non-certified assets.5
- Reichardt, Alexander, Fuerst, Franz, Rottke, Nico, & Zietz, Joachim. "Sustainable Building Certification and the Rent Premium: A Panel Data Approach." Journal of Real Estate Research. 2012.
- "The Business Case for Green Building: A Review of the Costs and Benefits for Developers, Investors and Occupants," World Green Building Council. 2013.
- Eichholtz, Piet, Nils Kok, and John M. Quigley. "Doing Well by Doing Good? Green Office Buildings." American Economic Review. 2010.
- Kaplow, Stuart D. "Does a Green Building Need a Green Lease?" University of Baltimore Law Review. 2009.
- Tilden, E. and Schiftan, R. Green is Good Part 2: Sustainability’s Impact on Office Investment Pricing. Research Spotlight. Cushman & Wakefield. 2021.