The effect of LEED certification on Shanghai’s prime office rental value

Abstract

Purpose

This study aims to examine whether Leadership in Energy and Environmental Design (LEED) certification yields additional premiums for Shanghai’s office rental sector.

Design/methodology/approach

The hedonic model is utilized to evaluate the impact of LEED, as well as of other factors, on the rental values of 59 Grade A office buildings in Shanghai, including 23 LEED-certified buildings and 36 non-LEED-certified buildings.

Findings

It is found that rental values of buildings with LEED are about 12.8 per cent than those of buildings without the same certification. Other factors, for instance accessibility to facilities such as subway station and 4-star hotels, the availability of catering services in surrounding areas as well as the building’s location (i.e. inside the CBD) also are significantly positively correlated with office rents in the sample commercial buildings.

Originality/value

Besides being one of the earlier contributions to the literature with regard to the study of the impact of green certifications in China’s office market, the findings in this study also provide some empirical evidence for stakeholders, such as developers, investors, property managers and market practitioners, to evaluate the introduction of green features (and/or green certifications such as LEED) as an investment decision.

Citation

Hui, E.C.-m., Chan, E.W.-f. and Yu, K.-h. (2015), "The effect of LEED certification on Shanghai’s prime office rental value", Journal of Facilities Management, Vol. 13 No. 3, pp. 297-310. https://doi.org/10.1108/JFM-10-2014-0033