Do office tenants really pay for the greenness?: Findings from PLS-SEM

Abstract

In Australia, it is not surprising to see tenants pay premium prices for the higher level of greenness of their office buildings. This is reflected by the ever-increasing number of environmentally friendly and energy efficient green buildings nationwide especially across the major Commercial Building Districts (CBDs). Nevertheless, the impact of tenants' office leasing behaviours on rents have not been fully explored. To address this knowledge gap, a survey of tenants who have leased the Sydney CBD-located office buildings was undertaken. The collected data were analysed using Partial Least Square - Structural Equation Modelling (PLS-SEM) techniques to identify the relationships amongst various tenants' leasing motivators, the level of greenness of their office buildings, and rents. The results show that tenants' leasing decisions about the level of greenness of their office buildings do not significantly contribute to office rents. Instead, the conventional attribute of building quality (e.g. floor plate size and building amenities) significantly and positively influences office rents. It is also found that building quality, along with the building's sustainability aspect (e.g. indoor environmental quality and CO2 emissions), is an important motivator for sustainability-focused organisations. However, the overall greenness level of office buildings is being considered as an important aspect for people-focused organisations rather than for sustainability-focused organisations. The results inform regulators and practitioners better-targeted strategies could be developed by understanding various tenants' leasing motivators and their influences on the greenness level of office buildings and rents.