Lawrence Berkeley National Laboratory

Advocates for high-performing, energy efficient buildings understand the hurdles to proving the business case to spur development and investment decisions among commercial real estate owners and investors. Although there is significant evidence that green buildings exhibit increased financial performance via decreased operating expenses and non-energy benefits such as workplace comfort and employee productivity, green building practitioners still face an uphill battle when asked to prove the profits, most frequently pointing to rent premium as an indicator to attract investment. This paper documents a recently conducted literature review commissioned by the US Department of Energy (DOE) of 39 peer-reviewed and published academic papers pertaining to green or energy-related building attributes and financial performance. The review (first published here) indicated that 27 papers found a positive correlation between green building certifications and rents. If this is the case, then why are green building development and energy efficiency retrofits not the norm for the industry? This paper first synthesizes the recent literature review to illustrate that the existing body of empirical evidence supports green building investment. Next, it describes a workshop of leading academics in real estate sustainability and finance who met in late 2017 to discuss gaps in green building research and assess data challenges in their fields. Insights synthesized the workshop were used to drive new DOE led research that can provide value and understanding to investors and builders of high performing buildings. Finally, the paper offers insights into why the market is not properly pricing building efficiency, with factors ranging from improper mitigation of risks associated with energy and lack of transparency and responsibility felt by building end users, and what further steps are needed to transform green building investment practices in the commercial real estate industry.