RICS Releases Sustainability Report on the Financial Performance of Green Office Buildings in the USA

NEW YORK, Feb. 23, 2011 /PRNewswire-USNewswire/ -- RICS has announced the release of a new report, "Sustainability and the Dynamics of Green Building": New Evidence on the Financial Performance of Green Office Buildings in the USA.

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The report is authored by Piet Eichholtz and Nils Kok of Maastrict University, and John Quigley of the University of California, Berkeley. Findings were presented on February 22, at the New York University's Schack Institute of Real Estate, Center for the Sustainable Built Environment's 1st Annual Conference on Sustainable Real Estate.

Commenting on the report, RICS' Global Head of Sustainability, Ursula Hartenberger said:

"The potential contribution of the real estate sector to a low-carbon economy is immense.  Investments into more sustainable business practices and technologies are not only beneficial for humans and the environment, but also for creating long-term value and competitiveness.  In terms of the business case within the commercial real estate sector, we are currently witnessing a shift from anecdotal evidence to well-documented case studies.  Recognizing the huge importance of empirical evidence in mainstreaming of so-called "green" buildings, "Sustainability and the Dynamics of Green Building" is the latest in an extensive series of RICS research reports exploring the value of sustainable buildings to investors, owners and tenants commissioned over the past few years. It is also part of RICS' cooperation program with the universities of Maastricht in the Netherlands and Berkeley, California. The single most important message of the report to the market clearly is that sustainable real estate investors can operate profitably even in times of financial constraints and that they may be better placed in future-proofing their assets than their less forward-thinking peers."

The research which represents a follow-up to a study carried out by the same research team before the onset of the financial crisis, confirms the findings of that earlier study, namely that even in difficult economic times so-called "green" office buildings can offer economic benefits to investors, including higher rents and lower risk premiums.  While the report's findings are based on U.S. data, the results are important on an international basis as they expand on the very limited body of existing work on the topic and provide vital tangible evidence that "buildings with green ratings in 2009 commanded rental rates that were substantially higher than those of otherwise identical office buildings, while explicitly controlling for the quality and the specific location of the buildings."

The study found that green office buildings in the U.S. performed better during the economic downturn of 2008 and 2009 than their comparable non-green high quality property investments.  The findings, which are based on North American data for buildings certified by the EOA's Energy Star Program, illustrate that rents and occupancy rates for green office buildings were higher during the 2007 to 2009 period than for properties that have not had energy-efficiency measures incorporated into their structures.

As the report emphasizes, real property continues to play an increasingly important role in matters of environmental conservation.  Small increases in the sustainability of buildings, or more specifically in the energy-efficiency of their operation, can have large effects on their current use of energy and on their life-cycle energy consumption.  

A full copy of the report will be available at www.rics.org within the next few days.

About the Authors

Piet Eichholtz

Piet Eichholtz is Professor of Real Estate and Finance and chair of the Finance Department at Maastricht University in the Netherlands. He teaches courses in Finance, and in Real Estate Finance and Investments. He has provided extensive services to public society, mainly through board memberships of industry organizations in the property sector, but also as an advisor to various government agencies. For example, he was a special property advisor to the UN Good Offices Mission on Cyprus. His academic work has resulted in a great number of publications, both in the Netherlands and internationally. Most of his work examines real estate markets, with a focus on international investment, portfolio management and housing markets. Key issues on his research agenda for the coming years are sustainable real estate and the effects of demographics on real estate markets. After having gained practical experience at the ABP and NIB Capital, he started Global Property Research, an international consultancy firm that specialized in property companies, which was acquired by Kempen & Co. in 2001. After leaving Kempen in 2004, he became co-founder of Finance Ideas, a financial consultancy company. He is currently a non-executive board member at IPD Holding, a member of the Advisory Boards of Redevco and the RO Group, of the Investment Committee of Loyalis, and of the Housing Scenario Group of Bouwfonds.

Nils Kok

Nils Kok currently holds positions as visiting scholar at the Haas School of Business, UC Berkeley, and as assistant professor in Finance and Real Estate at Maastricht University, the Netherlands. He is the recipient of a three-year research grant from the Dutch Organization for Scientific Research for his work on energy efficiency and sustainability in the real estate sector. He received awards from the United Nations Principles for Responsible Investment, IPE, the European Social Investment Forum, and the Aareal Bank/European Business School for his research. Nils is also an active executive teacher at the Luxembourg School of Finance, the Amsterdam Institute of Finance, and the Amsterdam School of Real Estate. He communicates his ideas and findings in the international arena as a frequent speaker on academic and industry conferences, and actively shares his expertise through workshops with investment practitioners and policy makers. His research has appeared in leading academic journals such as the "American Economic Review," "Real Estate Economics" and the "Journal of Real Estate Finance and Economics."

John Quigley

John Quigley is the I. Donald Terner Distinguished Professor at the University of California, Berkeley, where he holds professorial appointments in the Department of Economics, the Haas School of Business and the Goldman School of Public Policy. He has served as Chairman of Berkeley's Department of Economics and as Chair of Berkeley's Academic Senate. He is an expert on issues in public finance and taxation, and on real estate, mortgage and financial markets. He is the author of more than a dozen books and scores of scientific and professional publications. He served as President of the American Real Estate and Urban Economics Association, Vice President of the Association for Public Policy and Management, and he is currently President of the North American Regional Science Association. He has received many forms of recognition for his scholarly contributions, most recently an honorary degree from the Royal Institute of Technology, awarded in 2008.

About RICS

RICS www.rics.org is the world's leading qualification when it comes to professional standards in land, property and construction.

In a world where more and more people, governments, banks and commercial organizations demand greater certainty of professional standards and ethics, attaining RICS status is the recognized mark of property professionalism.

Over 100 000 property professionals working in the major established and emerging economies of the world have already recognized the importance of securing RICS status by becoming members.

RICS is an independent professional body originally established in the UK by Royal Charter. Since 1868, RICS has been committed to setting and upholding the highest standards of excellence and integrity – providing impartial, authoritative advice on key issues affecting businesses and society.

RICS is a regulator of both its individual members and firms enabling it to maintain the highest standards and providing the basis for unparalleled client confidence in the sector.

SOURCE RICS Americas