LEED-Certified Office Buildings Bring 4% Rent Premium: CBRE
Rents at LEED-certified U.S. office buildings have been about 4% higher than noncertified buildings in recent years, according to a new report by CBRE.
The effect on rents is higher for suburban properties than downtown ones, though the impact of LEED certification is felt in both places.
The real estate services giant analyzed more than 20,000 office buildings nationwide, using statistical analysis to control for buildings' location, age and renovation history. The average 4% rent premium is for the years 2019 to 2022, proving durable despite the drop in office occupancy beginning with the worst of the pandemic.
In fact, the 4% premium for LEED-certified buildings is at the low end of the historical window of a 4% to 8% premium, according to CBRE Global Chief Economist Richard Barkham.
LEED designation provides a larger rent premium for Class-B office buildings, according to the report. The averages also apply to Energy Star certification.
"LEED certification certainly is viewed as favorable by office occupiers, many of whom increasingly are requiring building owners to explain their ESG platforms during the space-search process,” CBRE President of Americas Investor Leasing Mike Watts said in a statement provided to Bisnow.
“A LEED certification may turn out to be a key determinant in a given occupier’s decision of where to lease their space, regardless of whether that designation brings a rent premium,” Watts said.
Among LEED-certified buildings, however, the report found no statistically significant rent premium associated with higher levels of LEED certification (such as gold or platinum). That implies that occupiers put monetary value on green labeling, but the degree of energy-efficiency isn't as important.
Minneapolis topped the list of cities with the most LEED-certified office buildings at 53% of its building stock, followed closely by San Francisco and Chicago. Nationally, the average is 31%.
Among the markets with less than 10% LEED-certified office buildings are Indianapolis, San Antonio, Honolulu and Norfolk, Virginia.
