levy_lockwood - Goal of the paper The goal of the paper...

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Goal of the paper The goal of the paper “Doing Well by Doing Good,” by Piet Eichholtz, Nils Kok and John M. Quigley, is to analyze the economic effect of green building practices. It focuses on the effect of green buildings on rent, effective rent and sale price. Prior to the publishing of this paper, evidence of increased economic value of green buildings was “based on anecdotal evidence.” However, supporting evidence of the economic value of green buildings could affect the decisions of both real estate and institutional investors. This paper provides the first systematic analysis of green buildings on economic outcomes (Eichholtz et al 2492). Broader context This paper aims to highlight the benefits that green buildings can provide to the economy. For example, firms have social responsibilities and could benefit from leasing office space in a green building. Investors often use social responsibility as a criterion for evaluating companies; thus a firm may choose to present itself as socially responsible to become attractive to investors. Also, firms could gain a positive reputation from using a green office space, which may lead to less intrusion from activists or government. Another benefit to firms would be higher profitability due to lower input costs and higher employee productivity. Green office buildings will have lower energy costs, better indoor air quality, and other characteristics that may increase profitability of a tenant. These benefits all give firms incentive to pay higher rents for an office building with a green rating. Data The Energy Star program is sponsored by the EPA and the Department of Energy used to certify appliances and buildings. The non-government, non-profit US Green Building Council developed the Leadership in Energy and Environmental Design (LEED) rating system in 1999 for buildings. Both the Energy Star and LEED ratings are associated with a commitment to environmental conservation, stewardship, and social responsibility. These green ratings are marketed to the firms mentioned above who may aim to gain a positive socially responsible image. This paper uses data of 1,350 certified green buildings in the US that are either Energy Star rated or rated by LEED, and that also match up to the buildings archived in CoStar, a database that archives buildings in the US. 694 of these buildings have current information about building characteristics and monthly rent and 199 of these buildings were sold between 2004 and 2007. The authors compare these green rated buildings to commercial office buildings located nearby by creating .2 square mile clusters, with each cluster including 1 green building and at least one nonrated building. The means and standard deviations for rental buildings shows that green buildings
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This note was uploaded on 09/04/2011 for the course ECON 140b taught by Professor Staff during the Winter '08 term at UCSB.

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levy_lockwood - Goal of the paper The goal of the paper...

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