Rosetta Stone

October 13, 2020

Economics + Asset Value

Talking Points • Research Brief • Collection Database

Summary

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 (WGBC 2013). High performance design elements increase asset value through lower operational expenses and enhance image.

Keywords

Economics, Asset Value, High Performance Design, Green Labeling, Operational Cost

Green Labeling

  • Labels can contribute to the marketability and desire of a property. Green buildings can have an economic advantage because they are likely to have “longer economic lives, lower marketability risk, and a lower risk of technical and regulatory obsolescence” (Reichardt 2012).
Economic Implications:
  • LEED certification has several levels from certified to platinum. There is “an average 3 percent increase in rent for each increase in certification level” (WGBC 2013).
  • Green buildings can charge 16 percent higher in selling prices than a conventional building (Eichholtz 2010).
  • LEED buildings have a 4.1 percent higher occupancy rate and Energy Star buildings have a 3.6 percent higher occupancy than non-certified buildings (Kaplow 2011).

Operational Cost Reduction

  • Operational expenses are the out-of-pocket costs for maintaining and running a space (Katz 2020). For a typical company, operational costs account for 6% to 15% of total business expenses (Attema 2018).
Economic Implications:
  • Personal control over the thermal environment of a space has been correlated to positive psychological responses (Wagner 2006, Van Hoof 2010).
  • When a patient in a hospital has the ability to control their personal environment before a procedure, the patient’s anxiety significantly decreased (t=3.85, P=.0002) (Wagner 2006).
  • Patients in preoperative care have been found to associate warm air with positive feelings of comfort and a significant decrease in anxiety (t=1.87, P=.06) (Wagner 2006, Fossum 2001).

Key References

Review Articles
  • Attema, Jeremy, Fowell, S.J., Macko, M.J., & Neilson, W.C. “The Financial Case for High Performance Buildings.” San Francisco: Stok LLC. (2018).
  • Bartlett, Ed. “Informing the decision makers on the cost and value of green building.” Building Research & Information 28, no. 5-6 (2000): 315-324.
  • Kaplow, Stuart D. “Does a green building need a green lease.” U. Balt. L. Rev. 38 (2008): 375.
  • Wiley, Jonathan A. “Green design and the market for commercial office space.” The Journal of Real Estate Finance and Economics 41, no. 2 (2010): 228-243.
  • WGBC (World Green Building Council). The Business Case for Green Buildings: A Review of the Costs and Benefts for Developers, Investors and Occupants. 2013.
    • Primary Research
    • Eichholtz, Piet, Nils Kok, and John M. Quigley. “Doing well by doing good? Green office buildings.” American Economic Review 100, no. 5 (2010): 2492-2509.
    • Fuerst, Franz, and Patrick McAllister. “An investigation of the effect of eco-labeling on office occupancy rates.” Journal of Sustainable Real Estate 1, no. 1 (2009): 49-64.
    • Fuerst, Franz, and Patrick McAllister. “Green noise or green value? Measuring the effects of environmental certification on office values.” Real estate economics 39, no. 1 (2011): 45-69.
    • Reichardt, Alexander, Franz Fuerst, Nico Rottke, and Joachim Zietz. “Sustainable building certification and the rent premium: a panel data approach.” Journal of Real Estate Research 34, no. 1 (2012): 99-126.