LEED-Certified Office Buildings Command Higher Rents, Even Amid Challenging Conditions

LEED-certified office buildings command a rent premium over their non-certified peers even as the market endures the reverberations of the COVID-19 pandemic and remote work, according to a new report from CBRE.

CBRE analyzed 20,600 U.S. office buildings to find that those with LEED certifications command an average rent premium of 4 percent between 2019 and 2022 over those without the certification. LEED is a green-building certification program that gauges buildings’ energy efficiency, carbon reduction, sustainability and other measures.

CBRE also looked at the top U.S. markets for LEED certification. Seattle ranked seventh, with 41 percent of its office building stock LEED-certified. Minneapolis led all markets at 53 percent. The national average was 31 percent.

“As more companies are looking for tangible improvements in carbon reduction, sustainability has become as important as modern amenities for many occupiers in the region. Larger companies are leading by example with ambitious plans to reduce their carbon footprints, while smaller occupiers are looking to owners and developers for identifiable changes to help them meet their goals for corporate responsibility,” said Tim Owens, senior vice president with CBRE in Seattle, specializing in office leasing.

Top 10 US Markets For LEED Certification

Source: US Green Building Council, CBRE Econometric Advisors, CBRE Research.

CBRE got clarity on the impact of buildings’ LEED certification on rents by using statistical analysis to factor out the buildings’ location, age and renovation history. LEED certification tends to be more prevalent in newer buildings in downtowns or popular submarkets. Thus, CBRE’s analysis sought to separate one influence from another.

“The current average 4 percent premium for LEED-certified buildings is at the low end of the historical window of a 4 percent to 8 percent premium,” said Richard Barkham, CBRE’s Global Chief Economist and Head of Global Research. “This shows that, even in challenging times for the U.S. office market, LEED certification creates value for buildings. We anticipate the premium will increase a bit as the office market slowly recovers and office occupiers increasingly favor sustainable properties.”

Nationally, the premium differs between downtown (2 percent) and suburban (4 percent) buildings. The latter likely gets a larger premium because LEED-certified buildings are more rare in suburbs than downtown.

CBRE found similar rent premiums in most cases for buildings carrying the Environmental Protection Agency’s Energy Star certification.

To read the full report, click here.