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The Operating Expense Puzzle of U.S. Green Office Buildings

  • Author(s)/Creator(s):
    Nikodem Szumil
    Franz Fuerst
  • Publisher(s)/Producter(s):
    American Real Estate Society

Cost savings from efficiency gains are at the core of the green building business case. Significantly lower energy bills are said to be a major factor in the green rent premium observed in earlier studies. Our study tests this relationship by inferring energy costs from operating expenses for a large dataset of U.S. office buildings and relating them to rental rates. We find that eco-certification is associated with a higher than anticipated total energy expenditure, which is the opposite of its expected effect. While our dataset does not contain a direct measure of actual energy consumption, this result puts the cost-saving argument into question. By contrast, we confirm earlier findings of a green rent premium but it might be an effect of factors unrelated to a tenant’s operating expenses.

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