Building Sustainability, Certification, and Price Premiums: Evidence from Europe

We examine how green certification impacts cashflows and transaction prices in the Western European office markets of France, Germany, Italy, the Netherlands, Spain, and the United Kingdom. We address sample selection bias by setting up a balanced panel matching sustainable-certified with noncertified buildings using various matching approaches. We find a statistically significant green building premium for properties in our sample. For certified properties, operating income and transaction prices are higher by approximately 12% and 10%, respectively. This premium is robust by country and higher for platinum- and gold-certified properties. Moreover, our examination at the market level indicates that the observed premium is not driven solely by markets with a limited supply of sustainable buildings. Additionally, the premium does not show a declining trend over time, but rather responds to market conditions. Notably, substantial heterogeneity in both cashflow and price premiums exists across countries and markets.