LEED Certification Makes More Sense for Class B Properties

There is a greater relative benefit to getting LEED certification for Class B assets than for Class A assets, according to a new analysis from CBRE.

“The Class B LEED rent advantage over non-LEED is roughly three times larger than the premium commanded by Class A LEED properties,” the analysis found in a study of the Boston area.

“Class B LEED properties have an average 180-basis point (bp) lower vacancy rate and a $9.18 per sq. ft. asking rent premium compared with non-LEED Class B properties. This is a wider delta than for the Class A cohort, where LEED buildings have a 160-bp lower average vacancy rate and a $3.75 per sq. ft. asking rent premium.”

Boston was chosen for the study because it has a significant number of LEED-certified buildings in the downtown area. Indeed, just over one in three Class A buildings in the city and one in 10 Class B** buildings has this certification. Most U.S, cities now have a large enough stock of such buildings to make meaningful comparisons with non-LEED certified buildings possible, the analysis noted.

The finding also verified earlier CBRE research that showed LEED makes economic sense. Average rent for 20,000 buildings studied was 31% higher for LEED structures than for their non-certified counterparts. Taking into account building location, age and renovation history, LEED still conferred a 3-4% rent premium. Energy Star certification also boosted rent.

“Tenants benefit from energy savings and increased productivity, while owners benefit from higher asset value. For real estate investors, green buildings offer lower mortgage default risk,” the earlier study concluded.