The Green Premium: How Much More Sustainable Buildings Earn

Quick answer: The green premium in real estate is the extra rent, occupancy or sale price a certified sustainable building earns over a comparable conventional one. The studies in this guide put it at about 3% to 11.6% on rents and about 16% to 20.6% on sale prices and capital values, depending on the market, the year and the method. One U.S. study also found occupancy about 7% higher. These are averages across many buildings, not a figure any single building can count on.

The green premium in real estate comes up whenever an owner weighs a certification, an energy retrofit or a new amenity. The useful question is not whether sustainable buildings earn more. It is how much more, why, and how much of that premium a specific building can actually claim. If the amenity is an on-site farm, our ROI calculator estimates its return.

This guide sticks to published evidence: a peer-reviewed study in the American Economic Review and two JLL Research publications. Every percentage below comes from those sources, and where the evidence is thin we say so. For the wider ESG picture, see our guide to ESG-aligned urban farming.

On this page: What it is · What the research shows · Why it exists · Visible vs invisible · Documenting your premium

What is the green premium?

The green premium is the difference in rent, occupancy or price between a building with a recognised sustainability certification or energy rating and an otherwise comparable building without one. Researchers isolate it by comparing certified buildings with nearby uncertified ones of similar size, age, quality and location, so that the gap left over can be attributed to the certification.

It shows up in three places on an asset owner's books:

• Rent. The contract rent per square foot a tenant agrees to pay.
• Occupancy. How much of the building is leased. This is why researchers also measure effective rent, which is rent adjusted for vacancy.
• Value. The sale price or capital value an investor pays, which prices rent, occupancy and perceived risk together.

The mirror image is often called a brown discount: the price cut a building takes for lacking a certification or rating that comparable buildings have. It is the same gap seen from the other side, and it matters when you decide whether certification is an upgrade or a defence of the value you already have.

What does the research show for rents, occupancy and sale prices?

The research shows a premium on all three measures, with sale prices and capital values moving more than rents. The figures differ by market and method, so read each one as its own finding rather than as a single industry average.

The most cited academic study is Eichholtz, Kok and Quigley's Doing Well by Doing Good? Green Office Buildings, published in the American Economic Review in 2010. The authors compared Energy Star and LEED-rated U.S. offices with nearby control buildings, some 10,000 buildings in all. Green-rated buildings rented for roughly 3% more per square foot, effective rents were above 6% higher, and selling prices were about 16% higher. Their results also suggest the occupancy rate of green buildings was about 7% higher than in comparable non-green buildings.

Broker research points the same way with more recent data. In The commercial case for sustainable buildings, JLL reports an average rental premium of 7.1% for green-certified class A offices across eight major U.S. and Canadian markets, 9.9% across nine major markets in Asia, and 11.6% for green-certified offices in London. On value, JLL's January 2023 analysis of 592 Central London office investment deals between 2017 and 2021 found capital values were on average 20.6% higher as a result of BREEAM certification.

Two cautions keep these numbers useful. First, the academic study uses U.S. data from 2004 to 2007, and the market has changed a lot since. Second, every study here covers offices. Do not carry an office premium over to a retail, industrial or residential asset without comparables of its own.

Why does the premium exist?

The premium has three likely sources: occupiers with climate commitments, investors and lenders who screen for ESG, and lower energy costs. The sources in this guide put numbers on the first and the third, but not on the second.

Occupier demand. Many large occupiers have carbon commitments that cover the space they lease. JLL reports that across the leased footprint of the top 100 occupiers in New York, 72% is tied to a carbon commitment, and that 80% of the top 100 corporate occupiers in Paris are signed up to carbon commitments. A tenant with a carbon target has a reason to prefer space that helps it meet that target.

ESG mandates. Investors report portfolio performance through benchmarks such as GRESB, and companies covered by disclosure rules such as CSRD report on their environmental impact. A certified building gives an investor or lender something concrete to report. That could help explain why capital values move more than rents in the studies above, but none of them isolates this effect.

Operating costs. Eichholtz, Kok and Quigley note that energy is 30% of operating expenses in a typical office building, the single largest and most manageable operating cost. They found that premiums were systematically related to energy-saving characteristics. Among the Energy Star-rated buildings in their sample, a 10% reduction in site or source energy use was associated with a 1.1% or 1.2% increase in market value, on top of the average 16% label premium.

Do visible amenities capture more of it than invisible upgrades?

No study cited here measures that separately: they put a price on certification and recorded energy performance, not on visible amenities such as green roofs, gardens or on-site farms. None of them compares those amenities with invisible upgrades, such as better controls, insulation or efficient equipment, so we do not put a number on it.

What the evidence does say is more useful than a yes or no. Eichholtz, Kok and Quigley found that increased energy efficiency is associated with higher selling prices beyond the premium paid for the label, and that the intangible effect of the label itself may also play a role. JLL's London analysis shows a similar split: alongside the BREEAM premium, a single step up in a building's EPC energy rating came with a 3.7% premium. In both studies, the energy performance that carried a price had been measured and recorded, in Energy Star data or in an EPC rating.

Visible amenities work on a different lever. A rooftop farm does not cut an energy bill, but it gives a leasing tour something to show and tenants something to use. Our guide to urban farms as a tenant amenity covers that side. Green space is also associated with higher property values in other settings. We cover that evidence, and its limits, in do urban farms increase property value. Here is where that leaves an asset owner:

• Invisible upgrades show up in energy data and ratings, and the studies tie those to value directly.
• Visible amenities give a leasing team something to show, but no study cited here puts a separate percentage on them.
• They are not rivals. Several certifications give credit for them: WELL for on-site food production, Fitwel for gardens, and LEED and BOMA BEST for green roofs. A well-documented amenity can count toward a certification, not only toward a leasing tour. See which certification frameworks apply to your building.

How do you document your building's premium?

You document your premium by proving the performance behind it, then tracking the leasing and value metrics that show the market paying for it. The studies average across many buildings; your valuer and your buyer will look at one.

1. Pick the frameworks that fit. Location, asset type, project stage and who is asking decide which ratings matter. Start by checking which ones apply to your building before you commit budget to any of them. Our Certification Reports page asks a few questions about your building and shows the reports that fit, with no account needed.
2. Build an evidence file, not a claim. A rating is awarded on documents. See what's in an audit-ready certification report and how certification reports are drafted and reviewed.
3. Decide who writes it and how much you need. Compare an in-house submission with a consultant, and decide between a contribution report and the full scorecard.
4. Track energy and ratings every year. Energy use and energy ratings are where the studies tied value to performance, so keep that data continuous rather than rebuilding it before a sale.
5. Track leasing against a comparison set. Record achieved rent, occupancy, renewals and downtime against similar uncertified buildings nearby. It is the same comparison the researchers made.
6. Record how amenities are used. For a visible feature such as an on-site farm, log programming, participation and tenant feedback. A leasing team and a valuer can both use that evidence.

Put that file in front of your valuer and your leasing brokers before a sale or refinancing, not after. To model what an amenity could add to income, our rooftop garden ROI model for corporate buildings walks through the numbers.

Dig deeper: do urban farms raise property value, the investment case for urban farms, the corporate ROI model, what a rooftop farm costs, and how an urban farm's amenity ROI compares with a rooftop lounge or fitness centre.

For asset owners, an on-site farm is a visible amenity that also produces certification evidence. See how MicroHabitat runs urban farming in commercial real estate across 250+ urban farms in 20+ cities.

Want to know what an on-site farm could add to your building's case? Book a demo and we'll walk you through the evidence it produces for your certifications and your leasing team.