Green buildings deliver higher income and value: study

TORONTO —A recent study has shown that office buildings with green certification perform better on value and revenue scales than those without, reports the Journal of Portfolio Management in its September issue.

The study of Bentall Kennedy’s North American offices was conducted by Dr. Nils Kok of Maastricht University in The Netherlands and Dr. Avis Devine of the University of Guelph.

The research analyzes 10 years of financial performance data across a Bentall Kennedy-managed office portfolio totalling 58 million square feet — 34 million square feet in the United States, 24 million square feet in Canada.

Overall, the results provide strong evidence that buildings with sustainable certification outperform similar non-green buildings in terms of rental rates, occupancy levels, tenant satisfaction scores and the probability of lease renewals, report the researchers.

The study of nearly 300 office properties across North America included lease-level data such as rents, rent concessions and lease renewal rates, as well as building-level information such as energy and water consumption and green building certifications.

Highlights of the findings include:

— Net rents, including the cost of tenant incentives, average 3.7 per cent higher in Leed certified properties in the U.S. than in similar non-certified buildings;

— Rent concessions for Leed and Boma Best buildings in Canada are on average four per cent lower than in similar non-certified buildings;

— Occupancy rates during the period were 18.7 per cent higher in Canadian buildings having both Leed and Boma Best certification, and 9.5 per cent higher in U.S. buildings with Energy Star certification, than in buildings without certifications;

— Tenant renewal rates were 5.6 per cent higher in Canadian buildings with Boma Best level 3 certification than in buildings with no Boma Best certification;

— Tenant satisfaction scores were seven per cent higher in Canadian buildings with Boma Best level 3 and 4 certification than in non-certified buildings; and

— Energy consumption per square foot was 14 per cent lower in U.S. Leed-certified properties than in buildings without certification.

"Previous studies have suggested similar correlations but none of these looked at in-depth, diverse metrics across a large portfolio for as long as 10 years," said Giselle Gagnon, senior vice president, strategic resources group at Bentall Kennedy.

"Investors want evidence to support the economic merits of investing in sustainable buildings, and this new academic research provides exactly that."