January 11, 2016
According to a recent study published in the Journal of Portfolio Management, green building certification is shown to improve property performance. This means that investment in sustainable buildings results in long-term economic benefits. The study uncovered both tangible and intangible benefits, with similar results in the U.S. and Canada.
The international research team that authored the study looked over 10-year financial data and other metrics across an office portfolio of 300 buildings at Bentall-Kennedy – one of North America’s largest real estate investment advisory and services firms – that totalled nearly 5.4 million square metres. They looked at rental and occupancy rates, and additionally reported on intangible benefits such as tenant satisfaction and lease renewals.
When compared to non-certified buildings, LEED-or BOMA BEST-certified buildings have been found to have advantages that include: Net effective rents, including the cost of tenant incentives, are on average 3.7 per cent higher in LEED-certified properties in the U.S.; energy consumption per square foot was 14 per cent lower in the U.S. LEED-certified properties; net effective rents, including the cost of tenant incentives, are on average nearly four per cent higher in LEED certified properties in the U.S.; tenant renewal rates were nearly six per cent higher in Canadian buildings with BOMA BEST level three certification; and tenant satisfaction scores were seven per cent higher in Canadian buildings with BOMA BEST level three or four certification.
Since the study was conducted, BOMA BEST has rebranded its certification program. Level three certification is known as Gold, and level four certification is now known as Platinum.
The study suggests that cost savings from certified buildings are related to more stability in building operational costs and reduced tenant turnover.