This paper assesses whether commercial real estate participants are willing to pay a premium for an energy efficient building that has not received a green label. I utilize a unique dataset of detailed building-level observations and a spatial semiparametric matching framework that exploits quasi-experimental state-by-year variation in the implementation of mandatory building energy codes, to estimate selling price and rent premiums for a more stringent code. I find that buildings constructed under a more stringent energy code are associated with rent and selling price premiums of approximately 2.7% and 10%, respectively, compared to buildings constructed just before the code came into effect. When tenants pay directly for utilities, buildings constructed under an energy code are associated with 5.7% higher rents. These premiums are consistent with complete capitalization of estimated building-level savings, and therefore cast doubt on the existence of an energy efficiency gap resulting from adverse selection between landlords and tenants.

This paper assesses whether commercial real estate participants are willing to pay apremium for an energy efficient building that has not received a green label. I utilizea unique dataset of detailed building-level observations and a spatial semiparametricmatching framework that exploits quasi-experimental state-by-year variation in the implementationof mandatory building energy codes, to estimate selling price and rentpremiums for a more stringent code. I find that buildings constructed under a morestringent energy code are associated with rent and selling price premiums of approximately2.7% and 10%, respectively, compared to buildings constructed just before thecode came into effect. When tenants pay directly for utilities, buildings constructedunder an energy code are associated with 5.7% higher rents. These premiums are consistentwith complete capitalization of estimated building-level savings, and thereforecast doubt on the existence of an energy efficiency gap resulting from adverse selectionbetween landlords and tenants in commercial buildings.