The price of innovation: An analysis of the marginal cost of green buildings

Energy efficiency plays an important role in reducing the carbon externality from buildings, but economic analyses of more efficient, green building have thus far ignored input costs. This paper finds that the average marginal cost of green-labeled construction projects is smaller than the value premiums documented in the literature. However, design fees, representing just a fraction of development costs but paid largely up-front, are significantly higher for green construction projects. These projects also take longer to complete. The results provide some insight into the market barriers and market failures that may explain the relatively slow adoption of otherwise economically rational green construction practices

Energy performance and capital expenditures in manufacturing industries

Little is known about how firms change energy consumption over time. Yet, to meet global climate change targets, understanding how changes in firm investment impact environmental performance is important for policymakers and firms alike. To investigate the environmental performance of firms, we measure the energy consumption and efficiency of firms in the Netherlands’ manufacturing industries before and after large capital expenditures over the 2000 to 2008 period. Unique to this data set is that firm investment is decomposed into the following three streams: investment in buildings only, investment in equipment only, or a simultaneous investment in both buildings and equipment. We find that firms increase energy consumption when experiencing a simultaneous investment. However, after large capital expenditures, energy efficiency increases. Further decomposition by firm types suggests that the building capital investments of firms active in high-tech, energy-intensive, and low labor-intensive industries do not coincide with energy efficiency improvements while energy efficiency does increase with capital expenditures in equipment. From a policy perspective, it is important for regulators to understand firm investment and production processes, which help regulators understand when and where energy efficiency increases are feasible across firm types and expansionary production strategies. Firms, regulators, and other third parties may work together to develop an energy efficiency plan in line with investment strategies, including enhanced transparency by firms, energy efficiency subsidies, and R&D tax credits, for innovation. Targeted agreements may work to cooperatively improve energy performance

Energy efficiency and economic value in affordable housing

Strong rental protection in the affordable housing market often prohibits landlords from charging rental premiums for energy-efficient dwellings. This may impede (re)development of energy efficient affordable housing. In the netherlands, affordable housing institutions regularly sell dwellings from their housing stock to individual households. If they can sell energy efficient dwellings at a premium, this may stimulate investments in the environmental performance of homes.we analyze the value effects of energy efficiency in the affordable housing market, by using a sample of 17,835 homes sold by dutch affordable housing institutions in the period between 2008 and 2013. We use energy performance certificates to determine the value of energy efficiency in these transactions. We document that dwellings with high energy efficiency sell for 2.0–6.3% more compared to otherwise similar dwellings with low energy efficiency. This implies a premium of some eur 3,000 to eur 9,700 for highly energy efficient affordable housing

Cost-effective and high performance renovation of existing residential multi-family buildings in three European countries

The built environment is a central aspect of daily human life. Building processes are also among the most cost intensive processes that we come into contact with. As for residential buildings, many people take 20 or 30 years, or even more, to pay back their home loans. Refurbishment of buildings is seen as a possible major contribution to lowering the impact of buildings on the environment [1] while being, ideally, economically promising and keeping the social identity of our built environment. On the other hand, regulations are often centered on the sustainability of new buildings [2], and there is a lack of regulations tailored to refurbishment [3]. At the same time existing buildings are seen as a key factor in local identity, and as a hub of socio-ecological development [4].The EU funded BEEM-UP project (Building Energy Efficiency for Massive market UPtake) [5] has the goal to demonstrate the economic, social and technical feasibility of retrofitting initiatives for a 75 percent reduction in energy consumption in existing buildings, and lay the ground for massive market uptake. BEEM-UP involves key expertise to implement and demonstrate innovative building and energy management approaches with the overall aim to improve energy efficiency in existing buildings and obtain better indoor comfort conditions in three ambitious retrofitting projects. The main emphasis is placed on the economic and ecological life cycle assessment and comparison of the different projects and applied measurements in Sweden, the Netherlands and France. All projects are large-scale residential buildings with a focus on social housing, apartments and flats. All three sites are representative examples in the respective countries of building cohorts that are due for refurbishment.One of the main goals of the BEEM-UP project is to compare the refurbishment approaches of the different countries, and to provide an exchange regarding related problems and solutions. For this purpose an ecological as well as life cycle cost assessment has been carried out for all three sites. For each site six refurbishment scenarios have been defined through intensive consultations with the building owners and other stakeholders, for instance tenants or tenant representatives. First preliminary results indicate that it is economically and technologically feasible to achieve 75 percent reductions in energy consumption for the existing building stock.However, these preliminary findings point to institutional and social impediments that may not lead to massive market uptake in the social housing real estate community. Social housing institutions face distinct regulations and economic constraints, which can inhibit their uptake of energy retrofit policies [6]. On the one hand, national and EU wide policies nudge building owners towards basic energy-efficiency measures. On the other hand, institutional factors historically embedded into the social housing framework like rent controls and governmental rent subsidies inhibit a more equitable distribution of refurbishment costs between tenants and building owners. Moreover, discounted third-party capital is limited and subsidies at the national and local levels cannot support the level of refurbishments needed across the housing stock.However, there is economic value in energy-efficiency refurbishments of the building stock. An increasing number of studies document increased transaction values for buildings that are relatively more energy-efficient [7,8]. However, BEEM-Up has shed light on other sources of value at the property level. Namely, firms that have developed the product, process and organizational innovations associated with energy-efficiency retrofits could be financially more nimble and efficient in their housing portfolio relative to their non-innovative peers. In addition, there are more ways than transaction value and rental income to see the financial benefits of energy-efficiency. Alternate sources of income from renewable energy and even less explored financial benefits from taxation and depreciation that are currently linked to energy-efficiency investments are another source of savings for energy-efficiency that is far less explored. Thus, political and economic capital is required to shift institutions and firms towards an innovation mind-set to meet the needs of an ecologically improved building stock

Cost-effective and high performance renovation of existing residential multi-family buildings in three European countries

The built environment is a central aspect of daily human life. Building processes are also among the most cost intensive processes that we come into contact with. As for residential buildings, many people take 20 or 30 years, or even more, to pay back their home loans. Refurbishment of buildings is seen as a possible major contribution to lowering the impact of buildings on the environment [1] while being, ideally, economically promising and keeping the social identity of our built environment. On the other hand, regulations are often centered on the sustainability of new buildings [2], and there is a lack of regulations tailored to refurbishment [3]. At the same time existing buildings are seen as a key factor in local identity, and as a hub of socio-ecological development [4].The EU funded BEEM-UP project (Building Energy Efficiency for Massive market UPtake) [5] has the goal to demonstrate the economic, social and technical feasibility of retrofitting initiatives for a 75 percent reduction in energy consumption in existing buildings, and lay the ground for massive market uptake. BEEM-UP involves key expertise to implement and demonstrate innovative building and energy management approaches with the overall aim to improve energy efficiency in existing buildings and obtain better indoor comfort conditions in three ambitious retrofitting projects. The main emphasis is placed on the economic and ecological life cycle assessment and comparison of the different projects and applied measurements in Sweden, the Netherlands and France. All projects are large-scale residential buildings with a focus on social housing, apartments and flats. All three sites are representative examples in the respective countries of building cohorts that are due for refurbishment.One of the main goals of the BEEM-UP project is to compare the refurbishment approaches of the different countries, and to provide an exchange regarding related problems and solutions. For this purpose an ecological as well as life cycle cost assessment has been carried out for all three sites. For each site six refurbishment scenarios have been defined through intensive consultations with the building owners and other stakeholders, for instance tenants or tenant representatives. First preliminary results indicate that it is economically and technologically feasible to achieve 75 percent reductions in energy consumption for the existing building stock.However, these preliminary findings point to institutional and social impediments that may not lead to massive market uptake in the social housing real estate community. Social housing institutions face distinct regulations and economic constraints, which can inhibit their uptake of energy retrofit policies [6]. On the one hand, national and EU wide policies nudge building owners towards basic energy-efficiency measures. On the other hand, institutional factors historically embedded into the social housing framework like rent controls and governmental rent subsidies inhibit a more equitable distribution of refurbishment costs between tenants and building owners. Moreover, discounted third-party capital is limited and subsidies at the national and local levels cannot support the level of refurbishments needed across the housing stock.However, there is economic value in energy-efficiency refurbishments of the building stock. An increasing number of studies document increased transaction values for buildings that are relatively more energy-efficient [7,8]. However, BEEM-Up has shed light on other sources of value at the property level. Namely, firms that have developed the product, process and organizational innovations associated with energy-efficiency retrofits could be financially more nimble and efficient in their housing portfolio relative to their non-innovative peers. In addition, there are more ways than transaction value and rental income to see the financial benefits of energy-efficiency. Alternate sources of income from renewable energy and even less explored financial benefits from taxation and depreciation that are currently linked to energy-efficiency investments are another source of savings for energy-efficiency that is far less explored. Thus, political and economic capital is required to shift institutions and firms towards an innovation mind-set to meet the needs of an ecologically improved building stock

Energy Efficiency Information and Valuation Practices in Rental Housing

Abstract The consensus in the academic literature is that energy efficiency is associated with transaction value premiums, but it is not clear to what extent property appraisers take account of this. We decompose external appraisals of rental housing by international valuation firms in England and the Netherlands in two waves, keeping the samples of valued homes constant between these years. We find a notable change in the behavior of external property appraisers. In England, energy performance does not impact assessed values in 2012, while estimation results for 2015 show a significant discount in assessed values for D-, E- and F- relative to C-labeled dwellings. For the Netherlands, we do not observe a significant relationship between energy efficiency and assessed values in 2010, but in 2015 we find that more energy efficiency leads to higher external valuations

The Value of Design in Real Estate Asset Pricing

Does design contribute to real estate value? Practicing architects require evidence to justify both functional and aesthetic building needs within the financial ecosystem. Some buildings that become real estate assets are valued using models that consider some proxies for understanding value, but these features are abstract and may misidentify the sub-optimal differentiation that design brings. The lack of feedback between real estate valuation and building design often leads to poor design and economic outcomes. To address this miscommunication, we investigate the transaction price performance of four external architectural form features—diagonality, curvature, setbacks and podiums. Whilst controlling for drivers that are known to explain transaction price variation, we find that diagonality and podiums have a positive pricing differential of 12.4 and 9.7% more than rectilinear control buildings, respectively. Buildings with setbacks have a negative pricing differential of 10%. Furthermore, these results are also consistent for rental valuation. Results suggest that there is a significant economic impact of some architectural form interventions that differentiate commercial buildings and contribute to the role of form in design, planning and commercial real estate

Expansionary Investment Activities: Assessing Equipment and Buildings in Productivity

We study firm-level expansionary investment activities in both equipment and buildings—the so-called investment spikes. Our identification strategy decomposes firm investment spikes into three streams: a spike in equipment only, buildings only, or a simultaneous spike. Empirically, we find that the timing and size of investment in equipment and buildings are not independent. Firms conducting a simultaneous spike enhance firm scale more than in the case of a spike in equipment or buildings alone. Employment growth occurs when a firm builds structures. Investment in equipment affects the optimal input mix and high productivity in equipment and buildings provides investment timing signals. In low-tech sectors firm production growth depends on investment in buildings. In contrast, a necessary condition for firms in high-tech sectors to grow their production is investment in equipment.keywordsinvestment spikesequipmentbuildingsinterrelationscaleproductivityinput mixefficiencylow- and high-techlabour intensity

Spatial Dependence in International Office Markets

This paper investigates spatial dependence in the prices of office buildings in Hong Kong, London, Los Angeles, New York City, Paris, and Tokyo for 2007 to 2013. Compared to prior literature, we find low economic impact from spatial dependence in all six markets, and spatial and spatial-temporal dependence do not moderate the effects of hedonic characteristics statistically or economically. However, investor and seller types as well as neighborhood location have a significant impact on the economic and statistical significance of the spatial and spatial-temporal parameters. Spatial office price indices for London, Paris and Tokyo decline somewhat more than do hedonic indices during the crisis