According to a recent release from Bentall Kennedy (one of North America’s largest real estate investment advisers), “ground-breaking research finds that green office buildings deliver higher income and value.” An analysis of financial performance data for a decade-worth of data for a 58 million square foot office portfolio revealed that, “buildings with sustainable certification outperform similar non-green buildings in terms of rental rates, occupancy levels, tenant satisfaction scores, and the probably of lease renewals.”
The study of nearly 300 office properties across North America included lease-level data such as rents, rent concessions, and lease renewal rates, as well as building level information such as occupancy rates, tenant satisfaction scores, energy and water consumption, and green building certifications. Highlights of the findings include:
- Net effective rents, including the cost of tenant incentives, average 3.7% higher in U.S. LEED certified properties than in similar non-certified buildings.
- Rent concessions for LEED and BOMA BESt buildings (Canada) are on average 4% lower than in similar non-certified buildings.
- Occupancy rates during the period were 18.7% higher in Canadian buildings having both LEED and BOMA BESt certification–and 9.5% higher in U.S. buildings with ENERGY STAR certification–than in buildings without certifications.
- Tenant renewal rates were 5.6% higher in Canadian buildings with BOMA BESt Level 3 certification than in buildings with no BOMA BESt certification.
- Tenant satisfaction scores were 7% higher in Canadian buildings with BOMA BESt Level 3 and 4 certifications than in non-certified buildings.
- Energy consumption per square foot was 14% lower in U.S. LEED certified properties than in buildings without certification.
*Content originally posted on Bentall Kennedy’s News and Media webpage.
The report itself states:
“The findings are interesting and important for real estate occupants, owners, and policy makers: besides confirming rental and occupancy differences between green and conventional buildings, we document significantly higher levels of tenant satisfaction, increased probability of lease renewals, and decreased tenant rent concessions for certified buildings. These results hold fairly constant across the Canadian and U.S. samples and are among the first to provide insight into the nonfinancial implications of constructing and adopting more sustainable space. Although results on green premiums have been widely documented, these findings help understand the value drivers, which clearly stem from more “sticky” tenants that appear to be more satisfied in green buildings than in conventional buildings.
The results for resource consumption and green building certification are less robust, but evidence indicates that buildings certified under operation-focused programs (LEED-EBOM and BOMA BESt) do experience decreased utility usage. These findings imply that more research is needed on actual consumption outcomes of operating green buildings. Building codes are construction labels to not necessarily guarantee efficient operation or use by building occupants.”