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| Type | Master's Thesis |
| Scope | Discipline-based scholarship |
| Title | Green Buildings in Switzerland: An Empirical Analysis |
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| Institution | University of Zurich |
| Faculty | Faculty of Business, Economics and Informatics |
| Number of Pages | 50 |
| Date | 2021 |
| Zusammenfassung | Problem Statement In an effort to reduce the considerable environmental footprint of the built environment, rating, labelling, and certification programs have been increasingly adopted in many countries to promote improvements in the sustainable design, construction, use and demolition of real estate. The overall objective of such schemes is to incentivise the delivery of so-called green buildings that exhibit higher resource and energy efficiency and therefore minimize their environ- mental impact. For example, in Switzerland, the green building label MINERGIE has been introduced in 1998 and since then, has become a well-established label. Structured according to different levels, MINERGIE certifies the adherence to certain requirements of sustainable practice in buildings and hence, provides market stakeholders with a means to verify the relative sustainability of their estate projects or portfolios. Besides the concept of environmental sustainability, green building has increasingly become part of global investment strategies suggesting an interest in the economic performance of certification. From a corporate perspective, green buildings have the potential to create market value differentials as these buildings may (1) minimise the cost of operation and capital improvement expenditures and/or (2) maximise their net operating income. Previous scholars have extensively studied the link between different certification schemes and various value indicators for different types of buildings. However, most empirical findings have focused on popular labelling schemes such as LEED and BREEAM rendering Swiss MINERGIE certification underrepresented in this field. In addition, while most studies focus on total and sales differentials, only a small fraction disentangle the effects on subcomponents of these values. Hence, there remains practical and academic interest in the link between green building certification and economic performance. To address the two aspects, this thesis sets out to explore the following research question: How does green MINERGIE certification in Swiss residential and commercial properties influence rental prices and extra costs? Objective This thesis aims to shed light on the impact of a building’s sustainability attributes on its financial performance. More specifically, the objective of this research is to investigate and quantify the link between Swiss MINERGIE certification and the net rent as well as extra costs associated with residential and commercial properties in Switzerland. Approach and Theoretical Basis The evaluation of MINERGIE-certified properties in the Swiss market requires three steps: (1) the establishment of a sound theoretical model, (2) the selection of the study objects and an appropriate research design, and (3) the investi- gation of influencing factors by analysing the relevant data and the derivation of implications from the obtained results. For the first step, the broader literature on green building and respective certification is reviewed, and the most important green building certification schemes are introduced. These schemes are believed to serve as an effective means to resolve the information asymmetry potentially preventing markets from pricing the “green” performance of buildings. In consequence, as house buyers have greater transparency about the future savings of energy costs, green buildings should transact for a premium. Additionally, sustainability aspects should positively influence the energy efficiency of buildings. Based on these theoretical arguments, it is hypothesised in this thesis that MINERGIE certification (1) has a positive impact on the net rent and (2) a negative impact on extra costs of residential and commercial buildings alike. As a second step, the relevant study objects are selected, and an appropriate research design is developed. This involves the cleaning and preparation of a sample provided by REIDA which consists contractual data for 105,252 residential and 24,470 commercial building units in Switzerland of which 8.7% and 6.4% are MINERGIE-certified, respectively. To isolate the effect of green building, it is important to identify and consider other relevant attributes affecting the performance indicators of interest, hence, the dataset is comprising a rich set of structural and locational characteristics. The third step of this thesis assesses the effects of a building’s sustainability attributes on (1) its contractually agreed net rental price and (2) extra costs whilst controlling for other relevant attributes. This thesis follows prior studies in real estate analysis in employing hedonic regression analysis as developed by Rosen (1974). Results The empirical results of this thesis suggest that the premium tenants for residential buildings are willing to pay for a MINERGIE-certified building is estimated at an average of 2.7%, ceteris paribus. In the commercial market, the impact is quantified at 3.8%. These results confirm previous academic evidence that information disclosure on sustainability characteristics has positive implications on a building’s net rent. It can be concluded that sustainability performance is valued among private and corporate actors in the Swiss real estate market. These economic benefits carry considerable value implications with a relevant to investors and real estate developers. For extra costs, the results are less conclusive. It is found that certification does not yet fully capitalise energy savings realised over time in residential markets. Such finding could potentially be explained by the notion that green building certification has non-monetary benefits or that energy efficiency is not the main driver in extra costs. For commercial properties, the analysis yields an impact of 14.2% on extra costs. While this finding is contradicting prior expectation, these inconclusive results have been observed in previous studies before. |
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