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Is energy performance capitalized in office building appraisals?
KTH, School of Architecture and the Built Environment (ABE), Real Estate and Construction Management, Building and Real Estate Economics.ORCID iD: 0000-0003-4921-9479
KTH, School of Architecture and the Built Environment (ABE), Real Estate and Construction Management, Building and Real Estate Economics.ORCID iD: 0000-0003-4849-0726
2013 (English)In: Property Management, ISSN 0263-7472, Vol. 31, no 3, 200-215 p.Article in journal (Refereed) Published
Abstract [en]

Purpose: Since 2009, all commercial buildings in Sweden should have undergone an energy performance rating in accordance with the European Union directive on the Energy Performance of Buildings. The main purpose of this rating is to illustrate a building's energy performance in an easy, straightforward manner. In doing so, it becomes easier for the actors on the real estate market to assess the building's energy performance, which in the end should be reflected in the capital value of the property. The aim of this paper is to study the EU Energy Performance Certificates' impact on office buildings' capital values. Design/methodology/approach: In this paper an econometric approach is used to estimate the energy performance impact on buildings' capital values. A panel data set was constructed using economic data from IPD Nordic and Energy Performance Certificates from the Swedish National Board of Housing, Building and Planning. Findings: This study shows that a building's energy performance has no impact on its capital value. Research limitations/implications: There may be a selection bias in the sample as the study is dependent on data from IPD Nordic. Originality/value: This is one of the first papers that study the EU Energy Performance Certificates' impact on office buildings' capital values in Sweden.

Place, publisher, year, edition, pages
2013. Vol. 31, no 3, 200-215 p.
Keyword [en]
Capital value, Energy Performance Certificate, EPC, Hedonic price model, Office buildings, Sweden
National Category
Economics and Business
URN: urn:nbn:se:kth:diva-116502DOI: 10.1108/02637471311321450ScopusID: 2-s2.0-84878882456OAI: diva2:589960

QC 20140617

Available from: 2013-01-21 Created: 2013-01-21 Last updated: 2016-04-07Bibliographically approved
In thesis
1. Economic studies of Green Commercial Buildings in Sweden
Open this publication in new window or tab >>Economic studies of Green Commercial Buildings in Sweden
2013 (English)Licentiate thesis, comprehensive summary (Other academic)
Abstract [en]

Climate change has risen to become one of our most critical global issues to resolve. Greenhouse gas emissions have been identified as one of the main causes for increased global temperature. As most energy production causes emission of greenhouse gases, a more energy efficient real estate sector could reduce the global greenhouse gas emissions. This reduction could be dramatic, as the real estate sector accounts for quite a large share of the society’s total energy usage. However, it is argued that even economically profitable investments are not being conducted to the full extent, leaving an “energy efficiency gap”. From an economic perspective there are multiple hinders that hampers environmental and/or energy efficiency investments (e.g. transaction costs, split incentives, capital constraints).

This licentiate thesis studies environmental issues from an economic point of view in the commercial built environment in Sweden. The main purpose is to illustrate how different real estate actors respond to building environmental and/or energy performance, with focus on barriers, actions and economic outcome/impact. The thesis consists of an introductory essay and two articles.

The first article studies the implementation of green leases. The study showed that complex contract structure involving different parties easily create so called “split incentives”, which can be very hard to resolve by additional agreements. This could be one explanation to why some profitable energy efficiency investments are not being realized. Furthermore, the study showed that the building owners were quite risk averse, in the sense that they were reluctant to conduct energy efficiency investments with longer pay-off periods than the current lease term. As Swedish commercial leases have a short contract length, this myopic view hampers energy efficiency investments with longer pay-off periods. An additional result from the study was the emotional aspect, from the tenant’s point of view, to invest in somebody else’s property. In general, the tenant considered building improvements to be the landlord’s responsibility. All in all, a conclusion that could be drawn is that the separation of building ownership and usage may have a negative impact on the leased commercial building stock’s energy performance.

The second article studies whether energy performance affects the appraised value of office buildings. The overall result was that the energy performance rating had no impact on the commercial office buildings’ market values. The study indicated that rents, “time of valuation”, changes in vacancy rates, location and “low building age” had the greatest impact on assessed market values. This result could be due to that the correlation between energy usage and maintenance costs is low. Further explanation could be that the specified model suffers from multicollinearity, as the effect of improved energy efficiency cannot be separated from the building age or rent.

The including studies support the notion that energy efficiency measures are difficult to implement and appraise to the full extent. Hence, future research is going to focus on how “green” features better could be incorporated into real estate valuation practices as well as evaluation of how environmental certified buildings are actually performing (concerning rents, energy usage, user satisfaction etc.).

Place, publisher, year, edition, pages
Stockholm: KTH Royal Institute of Technology, 2013. 27 p.
TRITA-FOB, 2013:1
National Category
Economics and Business
urn:nbn:se:kth:diva-116450 (URN)978-91-85783-29-8 (ISBN)
2013-02-15, L1, Drottning Kristinas väg 30, KTH, Stockholm, 13:00 (English)

QC 20130121

Available from: 2013-01-21 Created: 2013-01-18 Last updated: 2013-01-21Bibliographically approved
2. Green Buildings: Exploring performance and thresholds
Open this publication in new window or tab >>Green Buildings: Exploring performance and thresholds
2016 (English)Doctoral thesis, comprehensive summary (Other academic)
Abstract [en]

The overall aim of this research project is to study green/energy-efficient real estate from an economic perspective. The thesis summarizes the results from five different studies with a connection to green/energy-efficient real estate.The aim of the first paper (paper A) is to study how tenants perceive the indoor environment in green-rated premises, and to compare these results with tenants’ perception of a conventional building’s indoor environment. The main result is that the tenants in the green-rated building are more satisfied with the indoor environment than the tenants in the conventional building.Papers B and C assess whether energy efficiency has an impact on buildings’ income and market values using Swedish real-estate data. The key result is that although there is a small impact on building-related income, this does not seem to translate into a higher market value.The last two papers included in this thesis study hindrances to a more energy-efficient building sector. In paper D, two office buildings are used as baseline cases to provide insights into the difficulties that can arise when trying to upgrade a building to make it more energy efficient. The results indicate that changing existing leases is a prohibitive process and that it is often difficult to evaluate the final impact of an energy upgrade. The last paper focuses on why it may be rational to postpone green refurbishments even if they are profitable. The main result is that it may be rational to postpone such refurbishments. However, by introducing different financial penalties and/or subsidies, these investments could be triggered today.To sum up, the results indicate that green buildings are preferred by tenants, but that there still appear to be economic barriers to a greener building sector.

Abstract [sv]

Det övergripande syftet med denna avhandling är att studera grön/energieffektiva byggnader ur ett ekonomiskt perspektiv. Avhandlingen består av en kappa och fem separata studier, vilka belyser tre olika forskningsfrågor.

Syftet med den första studien är att studera hur hyresgäster upplever inomhusmiljön i gröna byggnader. I studien jämförs inomhusmiljön i en grön byggnad med inomhusmiljön i en likvärdig konventionell byggnad. Resultatet visar, på det stora hela, att hyresgästerna är mer nöjda med inomhusmiljön i den gröna byggnaden. De nästföljande studierna, B respektive C, undersöker om byggnadens energiprestanda har någon inverkan på dess hyra respektive marknadsvärde. Resultaten visar på en liten signifikant hyrespåverkan, dock verkar denna inte ha någon effekt på byggnadernas marknadsvärdebedömningar. Skälet till detta kan vara att hyrespremien anses för liten för att ha någon signifikant inverkan på byggnadens marknadsvärde, alternativt att fastighetsvärderare inte beaktar energiprestanda när en fastighet värderas.

De två sista studierna studerar varför vissa, tillsynes lönsamma, energiinvesteringar inte genomförs. Resultaten från studie D visar på svårigheterna med att ingå ett samarbetsavtal (för att eliminera felaktiga incitament) mellan hyresgäst och hyresvärd. Sådana avtal tar lång tid att förhandla fram och det uppkommer ofta svårigheter med att utvärdera de tänkta energiinvesteringarnas ekonomiska utfall. Studie E utgår ifrån en realoptionsmodell, vilken används för att utvärdera när ”gröna” renoveringar bör genomföras i en befintlig byggnad. Studien visar att det kan vara rationellt att vänta trots att investeringen idag är lönsam. Vidare visar resultaten att det är möjligt att via byggsubventioner/finansiella ”straff” påverka aktörer att tidigarelägga energieffektiviseringsåtgärder.  Dock är det viktigt att dessa utformas korrekt så att det inte skapar några snedvridna incitament.

Övergripande visar resultaten att gröna byggnader är att föredra ur ett brukarperspektiv men att det fortfarande finns ekonomiska hinder för en mer hållbar byggsektor.

Nyckelord: gröna byggnader, energieffektiva byggnader, EPC, inomhusmiljö, Realoptioner, fastighetsekonomi.

Place, publisher, year, edition, pages
Stockholm: KTH Royal Institute of Technology, 2016. x, 31 p.
TRITA-FOB, 2016:3
Green Buildings, Energy-Efficient Buildings, EPC, Indoor Environment Quality (IEQ), Real Options Analyses (ROA), Real-Estate Economics
National Category
Research subject
Real Estate and Construction Management
urn:nbn:se:kth:diva-184874 (URN)978-91-85783-65-6 (ISBN)
Public defence
2016-04-29, Sal F3, Lindstedtsvägen 26, KTH, Stockholm, 14:00 (English)

QC 20160407

Available from: 2016-04-07 Created: 2016-04-06 Last updated: 2016-04-07Bibliographically approved

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