Significant green premium for office assets, says MSCI

Office buildings with sustainability ratings are achieving substantial sales premiums, MSCI research has found.

Analysis of prices paid by investors for offices in London and Paris shows a premium for buildings with sustainability ratings from organisations such as BREEAM and LEED. 

In Paris, the gap began to emerge in 2016 and now stands at 35%, while in London the gap emerged in 2019, but accelerated in the past two quarters and now stands at 25%. 

Tom Leahy, head of EMEA real assets research, said: “Our analysis uses a hedonic model which controls for some of the factors which impact office prices — building age and size, submarket location and a general quality component indicated by the price per unit.

“To run the analysis, we introduced a sustainability rating variable into the model, which means we can look at the pricing outturn for similar buildings with and without a rating. This helps address the view that assets with environmental ratings tend to be of better quality, meaning it can be difficult to isolate it as the reason for any perceived outperformance.”