W i l l G r e e n B u i l d i n g s b e A p p r o p r i a t e l y V a l u e d b y t h e M a r k e t ?
123
government bonds -- which are a benchmark for financial investments -- and the like as
a base, this is determined based on the risk premium for the relevant property (
pt
R
)
and the income appreciation rate for the relevant property (
i
g
) (Gordon, 1959).
Moreover, this risk premium (
pt
R
) may be expressed as the following equation.
(
)
ξ
), (
zLf R
=
(2)
Here,
L
indicates the liquidity risk, and the unforeseen risk (
ξ
) that could not be
forecast at the time of investment is also included.
Macro-level market fluctuations (
g
) are the same regardless of whether or not a
property is a green building. Moreover, if the unforeseen risk (
ξ
) to which the property
market is uniformly exposed is ignored, the added economic value of green buildings
may be differentiated based on changes in three factors: the income variation effect
(
t
v
y
) based on whether or not higher rent may be obtained compared to buildings not
outfitted with environmentally friendly features; the expense reduction effect (
t
v
O
), and
the discount rate/liquidity risk variation effect
)((
zL
) based on how much the liquidity
risk changes compared to non-green buildings. Below, I shall outline the effect of each
component.
Income Variation Effect
As outlined in the previous section, it has been reported that a premium exists with
respect to income for green buildings. Assuming that these findings are correct, the
question of why income increases for green buildings is an important one. This is
because the sustainability and extent of future premiums will change significantly based
on the underlying factors. Eichholtz et al. (2009b) analyzed what kinds of companies are
located in environmentally friendly buildings. Their results showed that companies with a
strong preference for being located in environmentally friendly buildings can be
categorized into six types: a) tertiary industry companies, for which energy cost savings
have a major effect on ensuring profits, b) companies at which there is strong demand
for Corporate Social Responsibility (CSR) from shareholders, c) companies which are
sensitive to their environmental load (companies such as those in the oil and energy
industries that deal in commodities which are a factor in environmental loads), d)
companies with many highly educated personnel who generate high added value, e)
government or public institutions, and f) companies sensitive to consumer behavior
(companies such as food manufacturers whose profits are directly linked to their
reputation with consumers).
In the case of a), the tenant company forecasts a relatively significant expense
reduction effect, and even if the nominal paying rent is high, it will be offset by this effect.
Based on this, it may be anticipated that the company judges that a practical rent
reduction effect can be expected. This falls under the expense reduction effect
discussed in the next section.
In the case of b), c), d), e), and f), paying high rent is justified for various reasons at the
respective companies due to an indirect effect, which is independent of the direct effect
in the case of a),
(
)
1
1
1
1
−−+
−
+
+
+ + +
vmt
m
t
v
t
v
y
y y
increases, and the value of green buildings
increases. However, questions arise here with respect to the issue of whether the results
indicated by Eichholtz et al. (2009a) and Fuerst and McAllister (2009) are also applicable
in Japan and whether or not the effect continues to occur throughout a building's lifetime
of
m
years.
