Accounting, finance & control

Green office buildings, high returns

September 1, 2011 | 1 min read

Green building is hot. Increased awareness of global warming and the extent of greenhouse gas emissions in the real estate sector have put energy-efficient and sustainable office buildings on the fast track. Analysis of Piet Eichholtz, Nils Kok and John M. Quigley of the Universities of Maastricht and California, Berkeley, show that certified green office buildings also give an economic advantage.

Office buildings that have been certified by the U.S. Green Building Council or EPA’s Energy Star have higher rents and asset prices than conventional office space. This was the case in 2007, and has remained unchanged during the past years. Remarkably, the large recent increases in the supply of green buildings and the economic downturn have not really affected the extra returns that can be gained on green buildings compared to conventional office space.

The greener, the better

It’s not just a certificate that sets ‘the green premium’. The researchers found that office buildings with higher ratings on the items ‘thermal efficiency’ and ‘sustainability’ accounted for higher rents and asset values. Even among green buildings, increased energy efficiency is fully capitalized into rents and asset values.

The findings may have implications for investors and developers of commercial buildings and for government policies as well. Already, green building accounts for a considerable fraction of the market, and it’s growing. Rated buildings may provide a hedge against rising energy prices, but also against the shifting preferences of both tenants and investors with regard to environmental issues.

More aggressive

According to Eichholtz, Kok and Quigley, their study shows that a modest program for energy saving, in this case the rating and certifying of energy-efficient buildings, does have a large payoff. Buildings that are certified by independent organizations as more energy efficient or sustainable, command economic premiums in the marketplace. The researchers say that based on these findings, more aggressive policies can have an even larger impact in affecting energy use and maybe the course of global warming.


This article may be reproduced according to our terms of use with attribution (and link, if online) to To be cited as: “Green office buildings, high returns”, Piet Eichholtz, Nils Kok, John M. Quigley,, September 1, 2011.

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Paper ‘The Economics of Green Building’


Piet Eichholtz
Professor of Real Estate Finance, Maastricht University

John M. Quigley †
I.Donald TernerDistinguished Professor, U.C. Berkeley

Nils Kok
Associate Professor in Finance and Real Estate, Maastricht University

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