Is there a demand for green offices in Central and Eastern Europe?

1
Is there a demand for green offices in Central
and Eastern Europe?

• Gunther Maier, Michal Gluszak, Andrej Adamuscin,
  Kateryna Kurylchyk

2
Content

• Introduction
• The current project team
• Conceptual background
• Interviews
• Survey instrument
• First results

3
Introduction

• Green Building movement in Central and Eastern
  Europe
• Green Building Councils in almost all CEE
  countries
• Various strategies, various certification schemes
• Internationally active developers and consultants
  got involved
• What is the value of green building certificates
  in the CEE market?
• Very few certified buildings
• Limited information on transactions
• Need to do a contingent valuation study

4
The Research Team

• Currently Cracow (Poland) and Vienna (Austria)
• Planned Kiev (Ukraine) and Bratislava (Slovakia)
• Michal Gluszak, Malgorzata Zieba, University of
  Economics, Cracow
• Gunther Maier, Kateryna Kurylchyk, WU Vienna
• Sabine Sedlacek, Modul University, Vienna
• Andrej Adamuscin, TU Bratislava

5
Conceptual Background

• Evidence for a positive effect of Green Building
  certificates on values and rents
• Eichholtz, Kok Quigley (2010) (US LEED and
  Energy Star) effective rent premium 7, sales
  price premium 16 the label by itself has a
  positive value above the implied energy savings.
• Fuerst McAllister (2011) (US LEED and Energy
  Star) rent premium 5 (LEED) and 4 (Energy
  Star) sales price premium 25 (LEED), 26
  (Energy Star)
• Wiley, Benefield Johnson (2010) (US LEED and
  Energy Star) rent premium 7 to 17 higher
  occupancy by 10 to 18 selling premium per sqft
  30 (Energy Star) to 130 (LEED).

6
Conceptual Background

• Positive image of Green Buildings
• Addae-Dapaah, Hiang Shi (2009) (Singapore,
  survey of occupants) No effect of awareness and
  appreciation of green benefits beyond cost
  savings and higher building values. Benefits are
  very uncertain.
• Hypotheses
• Green building certificates have a significant
  positive effect on rents and sales prices.
• In less developed markets (CEE) awareness will be
  low

7
Conceptual Background

• Method of choice
• Hedonic price estimation with certificate as
  explanatory variable
• Problem
• Too few green buildings yet in CEE markets very
  limited information on rents and transactions
• Solution
• Expert interviews
• Contingent valuation survey

8
Survey instrument

• Survey of companies who have moved to new office
  space within the last 2 years
• Goal identify the WTP (implicit price) for green
  building certificate
• Strategy contingent valuation
• Compare current office space with a similar
  hypothetical alternative which one would you
  have chosen?
• Analysis by use of a conditional logit model

9
Survey (start page)
10
Survey (page 1)
11
Survey (page 2)
12
Survey (page 3, repeated 10 times)
13
Survey

• Generating the hypothetical alternatives
• Criteria are sorted in decreasing expected
  attractiveness (new before old, city center
  before periphery)
• For all criteria except price, operating costs
  and certificate For the new alternative, we
  either stay at the criteria value (40) or go one
  step up (30) or down (30). When out of bounds,
  it is set to the boundary value.
• For certificates When certificate 50 same
  certificate, 50 no certificate when no
  certificate 40 no certificate, LEED, BREEAM
  and DGNB with 20 each

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Survey

• Generating the hypothetical alternatives
• Sum of characteristics gives a rough measure of
  attractiveness
• Randomly generated price deviations by 0, 5,
  10, 15 or 20 up or down
• Result centered around zero and shifted by
  difference in attractiveness
• Correction over the experiment
• When only the original option is chosen, the
  alternative option becomes cheaper
• When only the alternative option is chosen, it
  becomes cheaper

15
Kiev clickable map (12 areas)
16
First results - VIENNA

• 32 responses
• Respondent fixed effects omitted
• Few significant coefficients
• High Pseudo R-square
• Totcost always neg.sign.
• Cert_XXX mixed

  any LEED BREEAM DGNB other multiple
const -2.37 -2.42 -1.97 -2.29 -1.99 -2.2
totcost -0.13 -0.13 -0.14 -0.13 -0.13 -0.13
cert_XXX 0.34 1.15 -1.81 0.41 1.75 0.66
loc_2 -0.19 -0.15 -0.16 -0.19 -0.13 -0.17
loc_3 -1.38 -1.36 -1.48 -1.41 -1.43 -1.31
loc_4 -2.16 -2.26 -2.12 -2.14 -2.16 -2.1
loc_5 -2.12 -2.22 -1.72 -2 -2.03 -2.03
transp_2 0.01 -0.05 -0.03 0.01 -0.06 0.03
transp_3 -0.41 -0.62 -0.52 -0.41 -0.46 -0.38
transp_4 1.31 1.11 1.07 1.32 1.41 1.23
transp_5 -0.98 -1.06 -0.71 -0.84 -0.98 -0.93
age -0.59 -0.56 -0.53 -0.6 -0.6 -0.57
type_2 -0.3 -0.35 -0.26 -0.29 -0.24 -0.3
type_3 14.85 13.66 14.2 14.93 14.12 15.07
type_4 12.79 11.33 11.88 12.9 12.12 13.05
qual_2 -0.42 -0.48 -0.31 -0.4 -0.23 -0.46
qual_3 -2.03 -2.08 -2.01 -2.01 -1.83 -2.07
qual_4 -20.96 -20.06 -20.39 -21.02 -20.09 -21.18
             
LogLike -113.58 -112.40 -110.14 -113.73 -112.61 -113.60
Pseudo R2 0.46 0.46 0.48 0.46 0.46 0.46
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First results - VIENNA
  any LEED BREEAM DGNB other multiple
totcost -0.13 -0.13 -0.14 -0.13 -0.13 -0.13
cert_XXX 0.34 1.15 -1.81 0.41 1.75 0.66
             
value 2,66 8,60 -13,28 3,12 13,80 5,16

• Value of green building certificate in cost
  increase
• Outlier BREEAM (negative significant)
• Others in a meaningful range (3-9)

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First results Cracow
any LEED BREEAM DGNB other multiple
const -3,37 -0,47 -0,81 -0,98 -0,32 -0,43
totcost -0,21 -0,22 -0,19 -0,2 -0,2 -0,2
cert_XXX 2,72 0,89 1,67 0,75 18,37 -0,28
loc_2 0,75 0,5 0,55 0,46 0,44 0,48
loc_3 2,2 1,56 1,91 1,66 1,61 1,65
loc_4 -18,33 -16,64 -17,2 -16,41 -16,9 -16,19
loc_5 -16,2 -15,01 -15,15 -14,46 -15,52 -14,45
transp_2 -1,52 -0,91 -1,27 -1,14 -0,91 -1,04
transp_3 -4,42 -3,89 -3,56 -3,89 -3,71 -3,77
transp_4 38,92 36,2 34,61 35,46 36,64 35,03
age -0,35 -1,01 -1,04 -0,78 -0,97 -0,98
type_2 -1,7 -1,44 -1,1 -1,53 -1,6 -1,39
type_3 -4,42 -3,15 -2,21 -3,6 -3,2 -3,01
type_4 -7,57 -6,13 -5,64 -6,35 -6,11 -5,94
qual_2 -0,74 -1,21 -1,14 -0,81 -0,91 -1,03
qual_3 -1,87 -1,72 -1,62 -1,38 -1,38 -1,49
qual_4 -1,5 -2,52 -2,09 -2,2 -2,23 -2,38

• 18 respomdents
• Respondent fixed effects omitted

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any LEED BREEAM DGNB other multiple
totcost -0,21 -0,22 -0,19 -0,2 -0,2 -0,2
cert_XXX 2,72 0,89 1,67 0,75 18,37 -0,28
Value 12,76 4,02 8,62 3,77 90,22 -1,34
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Summary and conclusions

• Still very limited information basis needs to
  be expanded
• Weak support for the thesis that there is demand
  for green office buildings in CEE (Vienna)
• Green building certificate is worth 3-9 higher
  total cost
• Problem BREEAM / multiple?
• Surprisingly similar results
• Next steps
• More observations for Vienna and Cracow
• Implement Kiev and Bratislava
• Expand to other cities?