Is there a demand for green offices in Central and Eastern Europe?

Gunther Maier, Michal Gluszak, Andrej Adamuscin, Kateryna Kurylchyk

Content

Introduction The current project team Conceptual background Interviews Survey instrument First results

Introduction

Green Building movement in Central and Eastern Europe Green Building Councils in almost all CEE countries Various strategies, various certification schemes Internationally active developers and consultants got

involved

What is the value of green building certificates in the CEE market? Very few certified buildings Limited information on transactions Need to do a contingent valuation study

The Research Team

Currently: Cracow (Poland) and Vienna (Austria) Planned: Kiev (Ukraine) and Bratislava (Slovakia)

Michal Gluszak, Malgorzata Zieba, University of Economics, Cracow

Gunther Maier, Kateryna Kurylchyk, WU Vienna Sabine Sedlacek, Modul University, Vienna Andrej Adamuscin, TU Bratislava

Conceptual Background

Evidence for a positive effect of Green Building certificates on values and rents Eichholtz, Kok & Quigley (2010) (US; LEED and Energy

Star): effective rent premium + 7%, sales price premium +16%; the label by itself has a positive value above the implied energy savings.

Fuerst & McAllister (2011) (US; LEED and Energy Star): rent premium +5% (LEED) and 4% (Energy Star); sales price premium +25% (LEED), +26% (Energy Star)

Wiley, Benefield & Johnson (2010) (US; LEED and Energy Star): rent premium +7% to +17%; higher occupancy by 10% to 18%; selling premium per sqft $30 (Energy Star) to $130 (LEED).

Conceptual Background

Positive image of Green Buildings Addae-Dapaah, Hiang & Shi (2009) (Singapore, survey

of occupants): No effect of awareness and appreciation of green benefits beyond cost savings and higher building values. Benefits are very uncertain.

Hypotheses: Green building certificates have a significant positive

effect on rents and sales prices. In less developed markets (CEE) awareness will be low

Conceptual Background

Method of choice Hedonic price estimation with certificate as explanatory

variable

Problem: Too few green buildings yet in CEE markets; very

limited information on rents and transactions

Solution: Expert interviews Contingent valuation survey

Survey instrument

Survey of companies who have moved to new office space within the last 2 years

Goal: identify the WTP (implicit price) for green building certificate

Strategy: contingent valuation Compare current office space with a similar hypothetical

alternative – which one would you have chosen? Analysis by use of a conditional logit model

Survey (start page)

Survey (page 1)

Survey (page 2)

Survey (page 3, repeated 10 times)

Survey

Generating the hypothetical alternatives Criteria are sorted in decreasing expected

attractiveness (new before old, city center before periphery)

For all criteria except price, operating costs and certificate: For the new alternative, we either stay at the criteria value (40%) or go one step up (30%) or down (30%). When out of bounds, it is set to the boundary value.

For certificates: When certificate: 50% same certificate, 50% no certificate; when “no certificate”: 40% no certificate, LEED, BREEAM and DGNB with 20% each

Survey

Generating the hypothetical alternatives Sum of characteristics gives a rough measure of

attractiveness Randomly generated price deviations by 0%, 5%, 10%,

15% or 20% up or down Result centered around zero and shifted by difference in

attractiveness Correction over the experiment:

When only the original option is chosen, the alternative option becomes cheaper

When only the alternative option is chosen, it becomes cheaper

Kiev: clickable map (12 areas)

First results - VIENNA

32 responses Respondent

fixed effects omitted

Few significant coefficients

High Pseudo R-square

Totcost always neg.sign.

Cert_XXX mixed

  any LEED BREEAM DGNB other multipleconst -2.37* -2.42* -1.97 -2.29 -1.99 -2.2totcost -0.13*** -0.13*** -0.14*** -0.13*** -0.13*** -0.13***cert_XXX 0.34 1.15* -1.81** 0.41 1.75 0.66loc_2 -0.19 -0.15 -0.16 -0.19 -0.13 -0.17loc_3 -1.38* -1.36* -1.48** -1.41* -1.43** -1.31*loc_4 -2.16** -2.26** -2.12** -2.14** -2.16** -2.1**loc_5 -2.12 -2.22* -1.72 -2 -2.03 -2.03transp_2 0.01 -0.05 -0.03 0.01 -0.06 0.03transp_3 -0.41 -0.62 -0.52 -0.41 -0.46 -0.38transp_4 1.31 1.11 1.07 1.32 1.41 1.23transp_5 -0.98 -1.06 -0.71 -0.84 -0.98 -0.93age -0.59* -0.56* -0.53 -0.6* -0.6* -0.57*type_2 -0.3 -0.35 -0.26 -0.29 -0.24 -0.3type_3 14.85 13.66 14.2 14.93 14.12 15.07type_4 12.79 11.33 11.88 12.9 12.12 13.05qual_2 -0.42 -0.48 -0.31 -0.4 -0.23 -0.46qual_3 -2.03*** -2.08*** -2.01*** -2.01*** -1.83** -2.07***qual_4 -20.96 -20.06 -20.39 -21.02 -20.09 -21.18             LogLike -113.58 -112.40 -110.14 -113.73 -112.61 -113.60Pseudo R2 0.46 0.46 0.48 0.46 0.46 0.46

First results - VIENNA

Value of green building certificate in % cost increase

Outlier BREEAM (negative significant) Others in a meaningful range (3-9%)

  any LEED BREEAM DGNB other multiple

totcost -0.13*** -0.13*** -0.14*** -0.13*** -0.13*** -0.13***

cert_XXX 0.34 1.15* -1.81** 0.41 1.75 0.66

            

value 2,66 8,60 -13,28 3,12 13,80 5,16

First results Cracow

18 respomdents Respondent fixed

effects omitted

any LEED BREEAM DGNB other multiple

const -3,37 -0,47 -0,81 -0,98 -0,32 -0,43

totcost -0,21*** -0,22*** -0,19*** -0,2*** -0,2*** -0,2***

cert_XXX 2,72*** 0,89 1,67** 0,75 18,37 -0,28***

loc_2 0,75 0,5 0,55 0,46 0,44 0,48

loc_3 2,2 1,56 1,91 1,66 1,61 1,65

loc_4 -18,33 -16,64 -17,2 -16,41 -16,9 -16,19

loc_5 -16,2 -15,01 -15,15 -14,46 -15,52 -14,45

transp_2 -1,52* -0,91 -1,27 -1,14 -0,91 -1,04

transp_3 -4,42*** -3,89*** -3,56*** -3,89*** -3,71*** -3,77***

transp_4 38,92 36,2 34,61 35,46 36,64 35,03

age -0,35 -1,01 -1,04 -0,78 -0,97 -0,98

type_2 -1,7 -1,44 -1,1 -1,53* -1,6* -1,39

type_3 -4,42** -3,15* -2,21 -3,6** -3,2* -3,01*

type_4 -7,57*** -6,13*** -5,64*** -6,35*** -6,11*** -5,94***

qual_2 -0,74 -1,21 -1,14 -0,81 -0,91 -1,03

qual_3 -1,87* -1,72 -1,62 -1,38 -1,38 -1,49

qual_4 -1,5 -2,52 -2,09 -2,2 -2,23 -2,38

any LEED BREEAM DGNB other multiple

totcost -0,21 -0,22 -0,19 -0,2 -0,2 -0,2

cert_XXX 2,72 0,89 1,67 0,75 18,37 -0,28

Value 12,76 4,02 8,62 3,77 90,22 -1,34

Summary and conclusions

Still very limited information basis – needs to be expanded

Weak support for the thesis that there is demand for green office buildings in CEE (Vienna)

Green building certificate is worth 3-9% higher total cost

Problem BREEAM / multiple? Surprisingly similar results Next steps:

More observations for Vienna and Cracow Implement Kiev and Bratislava Expand to other cities?