They Cost More to Build But LEED-Certified Assets Command Much Higher Prices

Sustainability initiatives may pack on additional execution costs – but ballooning exit values for certified assets may make the up-front legwork worth it for investors. 

LEED-certified assets have commanded a 21.4% higher average market sales price per square foot over their non-LEED counterparts over the past three years, according to a new report from Cushman & Wakefield. And LEED-certified assets have also historically outperformed during recession-recovery periods.

Achieving ESG goals through LEED certification does come at a cost, whether through construction or renovation, however. A 2018 study found that the process typically results in 7.43% and 9.43% cost increases for gold and platinum certification levels,  and those fees will scale depending on the size of the project.. Cushman estimates that currently, the costs associated with certifying a 500,000 square foot new construction office building would run between $31,000 and $42,000, and soft costs also increase as architecture and engineering firms charge higher fees for such projects.

Cushman’s research also suggests that ESG assets command a strong premium in rents, with typical increases hovering around 11%. 

“Going green creates a win-win scenario for both owners seeking higher rents and tenants seeking to satisfy their own ESG strategy requirements,” the report notes. “These tenants have proven to be more resilient in economic downturns, supported by LEED-certified buildings that are able to achieve a lower vacancy than non-LEED in the post-pandemic world.”