1. The Evolution and Impact of a Green Office Submarket: A Framework for Analysis and a Research Agenda
Tunbosun B. Oyedokun, Neil Dunse & Colin Jones
Institute for Housing, Urban and Real Estate Research
School of Built Environment
Heriot-Watt University, Edinburgh
United Kingdom

2. Outline Introduction Motivation and Aim Review – Basic Evidences
Preliminary Data
Research Agenda

3. Introduction Offices as important property sector
Demand for office space prior ICT
Impact of ICT: case of the UK
Paradigm shift towards sustainability
Emergence of “green office class”

4. Motivation and Aim Replete of studies on:
Sustainability and green premium
Office submarket
Rental depreciation in office market
Dynamics of office market
Assess the evolution of green office submarket and its impact on non-green office sector

5. Review – Basic Evidences
Green Office as Investment Class
Increasing level of acceptance
BREEAM signals a new office submarket
Green premium still elusive
Increasing demand due to perceived benefit (Eichholtz et al, 2009; BSRIA, 2012)
Increasing supply to meet demand level
4/5 star offices about 69% of London office stock
90% of transaction in London (CoStar, 2013)

6. Review – Basic Evidences
Office Submarket
Various studies, various methods
Spatial
Structural
Nested (Watkins, 2001; Dunse & Jones, 2002)
Nature of demanders
Intra-urban spatial migration pattern (Jones, et al, 2004)
Hedonic model and similar statistics mostly used
Missing variables can mar hedonic output
Non-substitutability potential is key in defining submarket (White & Ke, 2014)

7. Review – Basic Evidences
Dynamics of Office Market
Demand and supply as basic factors of equilibrium
Endo/Exo-genous factors in turn affect the duo
Office space models based on interaction between:
Occupier and investment markets (Dipasquale & Wheaton,1992)
Spatially segmented markets (Stevenson, 2007)

8. Review – Basic Evidences
Dynamics of Office Market Cont’d
Dipasquale and Wheaton (1992)

9. Review – Basic Evidences
Dynamics of Office Market Cont’d
Indication of interaction between green and non-green office sectors (Chegut et al, 2014)
Increasing green office supply has:
Gentrifying effect on the entire market
Reducing effect on green office value
Green premium has been the focus

10. Preliminary Data BREEAM as the mark of greenness in the UK
Data obtained from BREEAM and CoStar
Data on London only as defined by CoStar
Analysis based on 162 properties

11. London by Submarket Cluster - CoStar
S/N
Submarket Cluster 1
London City 2
London Docklands 3
London Fringe 4
London M25 Corridor NE* 5
London M25 Corridor NW 6
London M25 Corridor SE 7
London M25 Corridor SW 8
London Midtown 9
London Southbank 10
London West End 11
London Western Corridor
These are further divided in submarkets.
*No data

12. London by Submarkets: BREEAM vs Total

13. BREEAM - London Submarket Clusters

14. Approximately 27% Status BREEAM Area (SF) All market 25694206
Total Rentable Building Area: BREEAM vs Total
Status
Area (SF)
BREEAM
All market
Approximately 27%

15. Growth of green office rentable space in London
Using 162 office properties from CoStar
Beginning from 1997
Year of construction or refurbishment used as year greenness was achieved

16. Green office rentable space in London

17. Research Agenda Green office submarket development
Identification of green office submarket
Dynamics of green office submarket

18. Green office submarket development
Trend in flow and volume of investment in green offices
Trend in green office space supply using BREEAM certification as benchmark

19. Identifying Green Office Submarket
Nature of occupiers
Non-substitutability potential
GREEN OFFICE SUBMARKET
Office relocation pattern
Identification matrix

20. Dynamics of Green Office Submarket
Modeling based on:
Endogenous variables from both submarkets
- demand, supply and rent
Exogenous variables: macroeconomic indicators

21. Expectations
In the short-run, rental depreciation in the non-green sector will be determined by stock, completions and occupancy in the green submarket
In the long-run, green office supply will be influenced by refurbishment/redevelopment in the non-green market.
More results are possible

22. THANKS FOR LISTENING