Investing in greener office buildings really pays off for landlords

A new study finds that environmentally friendly office buildings have happier tenants, higher rents and lower turnover

Building with dollar-shaped trees exploding from the top

(Illustration by Kagan McLeod)

Futuristic spaces where the building is powered using solar panels, windows are programmed to pop open at set times to let in fresh air, and an underground reservoir collects rainwater to be consumed for non-drinking purposes. Such things are nice to dream about, but a poor investment in real estate. Right? Well, in fact, the extra costs of adding environmentally friendly technologies to office buildings may pay for themselves quicker than you think.

A recent study from the University of Guelph examined 10 years of data from 148 buildings in Canada and 143 in the United States, and found that environmentally friendly buildings that met energy efficiency and sustainability standards have more satisfied tenants who are more likely to renew their lease. Landlords also enjoy higher revenue generated from higher rents and occupancy rates.

Highlights of the findings from the study include:

  • Rents on average are 3.7% higher
  • Occupancy rates were 18.7% higher in Canada and 9.5% higher in the U.S.
  • Tenant renewal rates were 5.6% higher in Canada
  • Tenant satisfaction scores were 7% higher in Canada
  • Energy consumption per square foot was 14% lower in the U.S.

The data clearly shows that investing with the environment and sustainability in mind can also be good business for building owners and investors.