The Political Economy of Green Industrial Warehouses

Abstract

Empirical research into the effects of environmental certification on commercial real estate properties routinely finds evidence of both significant rental rate and occupancy rate premiums accruing to owners of LEED and/or ENERGY STAR certified properties. Interestingly, however, the underlying determinants and drivers of such premia remain largely unexplored. This investigation expands our understanding of environmental certification and valuation effects by examining a previously unexplored property type: industrial warehouse facilities. Using a sample of 20,172 industrial properties, we find ‘‘green’’ certification plays an important, but contingent, role within this sector. Specifically, ‘‘green’’ warehouses in politically conservative areas rent at a significant discount relative to their non-certified counterparts, while similar properties in politically liberal areas rent at a significant premium. These results provide further evidence on the importance of political ideology to real estate decision-making, and offer the first insight into the importance of environmental certification within the industrial warehouse sector.