1. Why Do Companies Rent Green? Real Property and Corporate Social Responsibility ERES Conference Stockholm June 2009 Piet Eichholtz University of Maastricht John Quigley University of California Berkeley Nils Kok University of Maastricht

2. Why Do Commercial Tenants Choose to Rent in Green Buildings? 1.Well-publicized announcements by large firms TNT Group 2.No attention from students of management and real estate 3.Important reasons to know

3. Economic Value of Green Buildings 1.Higher rents 2.Higher occupancy levels 3.Less volatility in rents Some firms have a “preference” for green space Why understand those preferences? 1.To undertake green development, understand potential demand 2.To understand scope for voluntary measures to promote green investments

4. CSR and Real Property 1.Direct Economic Benefits A.Reduced energy costs B.Higher productivity (?) 2.Indirect Benefits A.Corporate reputation B.Reduced stakeholder pressure C.Attract investors, lower rates D.Attract customers 3.Risk Avoidance Litigation, regulation 4.Ethical Behavior

5. Six Propositions Proposition I: Firms in the tertiary sector, i.e. the service industry, profit most from the cost savings and the improved working environment of green office buildings. Therefore, they will have a higher likelihood of renting green office space. Proposition II: As stakeholder pressure regarding CSR is mainly directed at the largest and most visible firms in an industry, these are more likely to act in a social and environmentally “responsible” manner and will therefore have a higher likelihood of leasing green office space. Proposition III: Firms with environmentally sensitivie operations will be more likely to leasing green office space, as this can help to offset otherwise more negative corporate images.

6. Six Propositions Proposition IV: Firms in industries that are dependent on high levels of human capital and high wage workers are more likely to rent office space in green buildings. Proposition V: Government, government-related organizations, and non-profit institutions are more likely to act in socially-responsible ways, and thus to lease to green space, as monetary factors are of less importance. The possibly higher cost of leasing green space can be more easily passed on to the taxpayer or sponsors. Proposition VI: Firms that are concerned about customer responses will adjust their CSR actions to their industry peers.

7. Data Analysis Rated Buildings Conventional Buildings Nearby Tenants 4,390 8,000 LEEDS EnergyStar Tenants 286 1,045 3,179

8. Figure 1 Distribution of Green Office Buildings by State (percent of the stock of office space) 2008

11. Chicago, ILHouston, TXColumbus, OH Clusters of Green and Control Buildings

19. Conclusions 1.Occupancy of Green Buildings Oil, gas Industries Proposition III Legal & Financial Services Proposition I, IV 2.Tenant Composition in Green Buildings Tenants more concentrated Large firms more concentrated Proposition II Public Sector Concentrated Proposition V