Increasing evidence of climate change is
leading to legislation and market pressure
around the carbon emissions of buildings,
particularly in the UK. There have been
several studies examining whether
environmental certifications such as EPCs
and BREEAM result in higher prices being
paid for buildings. However, the data used
in these studies is now quite old, predating
recent developments in the field, including
higher numbers of certified buildings and
greater attention being paid to ESG issues.
This study examines data on 592
investment transactions in the Central
London Office market between 2017 and
2021. Using a hedonic regression method,
statistically significant price premia of
20.6% were found for BREEAM certification
and 3.9% for a single-step increase in EPC
rating. However, only BREEAM produced a
statistically significant yield premium, of -
0.24 percentage points. The relevance of
these results, and the implications for the
market, are discussed alongside other
recent research in the area.
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