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Has the Green Premium increased in recent years? An investigation using pricing evidence from the Central London Office Market
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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