Heterogeneous Price Premiums in Sustainable Real Estate? An Investigation of the Relationship between Value and Price Premiums

Focusing on the voluntary LEED and Energy Star environmental certification schemes in the US, this paper investigates whether price premiums exist across all building value categories or are localized to specific value segments. It finds that that the largest value building segment does not demonstrate any price premiums, while the smallest value categories do. It is suggested that the concentrated supply of eco-labelled offices in large, high quality buildings likely contributes to this phenomenon. Results from hedonic and quantile regressions indicate that price premiums for eco-certified real estate assets may not be uniformly distributed across value segments and that price premiums found in the literature are concentrated in smaller and mid-tier value buildings. This may be due to the comparatively lower market penetration of eco-certification schemes in these segments.