The political economy of green office buildings
| Published date | 12 July 2011 |
| Pages | 551-565 |
| DOI | https://doi.org/10.1108/14635781111150394 |
| Date | 12 July 2011 |
| Author | David Harrison,Michael Seiler |
| Subject Matter | Property management & built environment |
The political economy of green
office buildings
David Harrison
Texas Tech University, Lubbock, Texas, USA, and
Michael Seiler
Old Dominion University, Norfolk, Virginia, USA
Abstract
Purpose – This paper aims to examine whether rental premiums accrue to environmentally certified
class “A” office buildings and, further, to what extent such premiums vary with the political ideology
of the local market area.
Design/methodology/approac h – Using standard ordinary least squares (OLS) regr ession
techniques, the paper models rental rates on environmentally certified structures as a function of
the space market characteristics, economic environment, and political ideology within each local
market area.
Findings – The paper finds significant variation in environmentally certified rental premiums across
jurisdiction-specific political ideology metrics. Specifically, politically liberal locations exhibit green
rental premiums of nearly 6 percent, while politically conservative locations exhibit premiums of less
than 2 percent.
Originality/value – This paper expands the existing literature by offering further evidence of
positive rental premiums accruing to environmental certification, and by systematically exploring the
fundamental determinants of these observed value differences.
Keywords Green real estate,Political ideology, Office buildings,Rental value
Paper type Research paper
I. Introduction
The past decade has seen a dramatic increase in both the awareness and
implementation of sustainability initiatives within t he commercial real estate
industry. New technologies have been developed allowing firms to dramatically
reduce their environmental impact, while independent, third-party rating systems have
emerged to provide interested stakeholders a transparent assessment and certification
of compliance with best practices regarding the efficiency of building design,
construction, and energy consumption. The two most prominent rating systems in the
USA are LEED and Energy Star[1,2].
Interestingly, while governmental agencies, political activists, and environmentally
concerned citizens may value such “ green certification” along non- pecuniary
dimensions, most building owners and managers have a fiduciary responsibility to
maximize the financial return to their shareholders. Ideally, these managers (and their
shareholders) will adopt a long-run view of utility maximizing activities, thu s
The current issue and full text archive of this journal is available at
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The authors wish to thank seminar participants at the 2010 Clemson University Valuation
Colloquium for their helpful and insightful comments on a previous version of this research. All
remaining errors are, as always, the authors’ own.
Green office
buildings
551
Received December 2010
Accepted March 2011
Journal of Property Investment &
Finance
Vol. 29 No. 4/5, 2011
pp. 551-565
qEmerald Group Publishing Limited
1463-578X
DOI 10.1108/14635781111150394
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