“We observe that health-certified spaces, both registered and certified, transact between 4.4 and 7% more per square foot than their nearest non-certified neighbouring peers. This premium for healthy spaces is independent of all other factors, such as LEED certification, building age, renovation, lease duration, and submarket.”MIT Real Estate Innovation Lab
Green building certifications have become synonymous with environmental responsibility and innovation in the construction industry. They serve as benchmarks for sustainable design, construction, and operation, guiding developers, architects, and building owners toward environmentally friendly practices. Among the plethora of green building certifications available, a few stand out as the most popular and influential, enhancing value on a global scale.
But why are these certifications so important? Beyond their environmental benefits, green building certifications have a profound impact on asset value and market competitiveness. According to industry experts, sustainable certifications can significantly enhance the value and desirability of commercial real estate properties.
Moreover, sustainable certifications can lead to long-term cost savings for building owners and occupants. Energy-efficient features, water-saving technologies, and enhanced indoor air quality not only reduce operational expenses but also contribute to occupant comfort and well-being.
The RICS Sustainability Report 2023 highlighted a growth in demand for green buildings from Occupiers and Investors in Europe, which is higher than any other region surveyed (73% growth in EU and 60% growth in the UK).
“Green building certifications are also high on the agenda for market participants. Around 30% of professionals globally report that having green building certification (such as BREEAM, LEED, WELLS, NABERS) is an essential feature of a sustainable building for investors. In comparison, around one-fifth of contributors state this is a key feature for occupiers.” (RICS, 2023)
The positive correlation between green building certifications and asset value underscores the importance of sustainability in today’s real estate market. The price premia from green ratings appears to be driven by rental and yield effects. Rent premium for occupiers looking to meet net zero carbon targets, and supported income through increased occupier demand and reduced vacancy rates. And, yield premium obtained thanks to reduced risk premium of greener assets, with banks being incentivised towards funding greener assets thanks to benchmarking requirements, and greener buildings offering assurance of future proofing against obsoletion due to carbon related legislation.
“We found an 8-18% sales price premium for green-rated buildings compared to equivalent buildings without a BREEAM or NABERS rating across these markets, depending on the level of green rating.” (Knight Frank)
As businesses and consumers become increasingly environmentally conscious, demand for sustainable buildings continues to rise, driving investment in green technologies and practices. Green building certifications play a pivotal role in advancing sustainability goals and driving positive change in the built environment.
So, with numerous reasons to pursue Sustainable Certification, the only remaining question is which one to choose. We’ll break it down for you in this series, including: GRESB, BREEAM, HQM, NABERS UK, Fitwel, and LEED.