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

14. 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 anyLEEDBREEAMDGNBothermultiple const-2.37*-2.42*-1.97-2.29-1.99-2.2 totcost-0.13*** -0.14***-0.13*** cert_XXX0.341.15*-1.81**0.411.750.66 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 transp_20.01-0.05-0.030.01-0.060.03 transp_3-0.41-0.62-0.52-0.41-0.46-0.38 transp_41.311.111.071.321.411.23 transp_5-0.98-1.06-0.71-0.84-0.98-0.93 age-0.59*-0.56*-0.53-0.6* -0.57* type_2-0.3-0.35-0.26-0.29-0.24-0.3 type_314.8513.6614.214.9314.1215.07 type_412.7911.3311.8812.912.1213.05 qual_2-0.42-0.48-0.31-0.4-0.23-0.46 qual_3-2.03***-2.08***-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 R 2 0.46 0.480.46

17. First results - VIENNA  Value of green building certificate in % cost increase  Outlier BREEAM (negative significant)  Others in a meaningful range (3-9%) anyLEEDBREEAMDGNBothermultiple totcost-0.13*** -0.14***-0.13*** cert_XXX0.341.15*-1.81**0.411.750.66 value2,668,60-13,283,1213,805,16

18. First results Cracow  18 respomdents  Respondent fixed effects omitted anyLEEDBREEAMDGNBothermultiple const-3,37-0,47-0,81-0,98-0,32-0,43 totcost-0,21***-0,22***-0,19***-0,2*** cert_XXX2,72***0,891,67**0,7518,37-0,28*** loc_20,750,50,550,460,440,48 loc_32,21,561,911,661,611,65 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_438,9236,234,6135,4636,6435,03 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 -1,49 qual_4-1,5-2,52-2,09-2,2-2,23-2,38

19. anyLEEDBREEAMDGNBothermultiple totcost-0,21-0,22-0,19-0,2 cert_XXX2,720,891,670,7518,37-0,28 Value12,764,028,623,7790,22-1,34

20. 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?