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A Review of the Impact of Green Building Certification on the Cash Flows and Values of Commercial Properties

Department of Built Environment, School of Engineering, Aalto University, PL 14100, 00076 AALTO, Finland
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Sustainability 2020, 12(7), 2729; https://doi.org/10.3390/su12072729
Received: 17 February 2020 / Revised: 16 March 2020 / Accepted: 23 March 2020 / Published: 31 March 2020
(This article belongs to the Section Economic and Business Aspects of Sustainability)
This study aims to review empirical research concerning the impact of green certificates on property cash flows and values, particularly from professional property investors’ perspective. The study uses discounted cash flows (DCF), a widely used property valuation method in income-generating properties, as a methodological framework. In this study, over 70 peer-reviewed studies were identified, categorized, and analyzed in the DCF framework. The reviewed studies indicated that certificates might increase the rental income and decrease the operating expenses, vacancy, and risks of a property. Together with the brand value of certificates, these enhancements should lead to an increase in property value. The number of studies has grown rapidly during the 2010s. Lately, studies have developed from asset-level to portfolio-level examinations. Although the reviewed studies found certification to be beneficial, the range of reported benefits was wide, and over half of the studies concentrated on U.S. commercial real estate markets, with a strong focus on LEED and ENERGY STAR certificates. From a property valuation perspective, applying these results to other markets and certificates might be challenging. Property values that fully reflect the environmental performance of properties would be a key to motivate mainstream investors to adopt sustainable property features. View Full-Text
Keywords: sustainability; green certificates; energy performance certificate; green building premium; property investment; property valuation; property value; cash flow; real estate; review sustainability; green certificates; energy performance certificate; green building premium; property investment; property valuation; property value; cash flow; real estate; review
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Leskinen, N.; Vimpari, J.; Junnila, S. A Review of the Impact of Green Building Certification on the Cash Flows and Values of Commercial Properties. Sustainability 2020, 12, 2729.

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