An empirical study on the impact of green building certification on the rental of office buildings in Hong Kong

Abstract

With the increasing awareness of sustainable development, various approaches are adopted to cope with the challenges of climate change. Green buildings play an important role in environmental sustainability. Many of previous research has investigated the environmental effect of green building certifications while there are few comprehensive studies on the financial implications of green certifications. This study aimed to investigate whether there is a relationship between green certifications and office rental value in Hong Kong. This research collected the rental transaction data from 30 green-certified office buildings (BEAM Plus or LEED or both certifications) and 22 non-green office buildings in CBD locations (Central and Admiralty) and non- CBD locations (Wan Chai, Causeway Bay, North Point and Quarry Bay) as samples. In this research, a hedonic price model was adopted. The empirical findings suggested that: (1) green certifications in Hong Kong generate an additional rental premium of 19% for certified office properties; (2) there is no significant difference in rental premiums between BEAM Plus and LEED; (3) two green certifications stack to generate 18.6% more rental premiums compared to one green certification; (4) Green certifications in the CBD location brings 53.2% more rental premiums for office buildings than those in non-CBD locations. In other words, tenants appreciate green features in the office buildings and are willing to pay an additional premium for certified office buildings, The implications based on the research findings provide guidance for various stakeholders in the market, such as policymakers, researchers, developers, and investors, which will help them make better decisions in the future.