Green Buildings Draw Premium Rentals

In San Diego, a growing number of consumers seem to be riding on the green wave, if lower vacancy and higher rentals in green buildings is an indication.

Investors and tenants are willing to pay more for environmental friendly buildings compared to non-green propert, as a result of which vacancy levels have come down.

While close to 15.7 percent non-green buildings are vacant in San Diego, the vacancy level is 11.7 percent in green buildings, according to a CBRE report quoted by UT San Diego. On the leasing front, the rate is $2.42 per square feet for a green building compared to $2.04 for a non-green building.

However, despite high rentals, the report shows that tenants do not mind paying high rentals as most of these green buildings are either Class A or B structures that feature gyms, cafes and other luxury additions, thereby providing better facilities to consumers.

Also, many landlords have upgraded their buildings to environmental-friendly structures to attract tenants and rental premiums of three percent per square foot compared with non-green buildings of the same size, location and function, according to a research by the Royal Institute of Chartered Surveyors.

Titled ‘Doing Well by Doing Good’, the research shows that green buildings are economically beneficial due to the savings in energy bills and the higher rental yields. Besides, upgrading a non-green building to a green status will help increase its capital value at the time of sales by up to 16 percent, the report shows.

“Any businesses wishing to maximize profits will have to start looking at increasing the energy efficiency of the buildings in order to remain competitive,” Simon Rubinsohn, RICS Chief Economist, said in the study.

“By proving that green buildings are economically beneficial due to the savings they can make and the higher rental yields they attract, non-green buildings will eventually become an outdated model.”