The Evolution and Impact of a Green Office Submarket: A Framework for Analysis and a Research Agenda...
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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 ResearchSchool of Built EnvironmentHeriot-Watt University, EdinburghUnited Kingdom
Outline Introduction Motivation and Aim Review – Basic Evidences Preliminary Data Research Agenda
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”
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
Review – Basic Evidences
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)
Green Office as Investment Class
Review – Basic Evidences
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)
Office Submarket
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)
Review – Basic Evidences
Dynamics of Office Market
Review – Basic Evidences
Dynamics of Office Market Cont’d
Dipasquale and Wheaton (1992)
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
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
London by Submarket Cluster - CoStarS/NSubmarket Cluster
1London City2London Docklands3London Fringe4London M25 Corridor NE*5London M25 Corridor NW6London M25 Corridor SE7London M25 Corridor SW8London Midtown9London Southbank
10London West End11London Western Corridor
These are further divided in submarkets.
*No data
MertonBarnet
Richmond uponThamesDocklands Fringe
KnightsbridgeSouthbank West
PaddingtonHammersmith
BrentEalingSoho
BloomsburyClerkenwell
WestminsterNoho
Western FringeSt James's
Northern FringeEastern Fringe
VictoriaMarylebone
HounslowCroydon
HillingdonCovent Garden
MayfairHolborn
City Core WestSouthbank East
City FringeDocklands Core
City Core EastCity Core North
0 2000000 4000000 6000000 8000000 10000000 12000000 14000000 16000000
RBA Total
RBA BREEAM
Rentable Building Area (SF)
London by Submarkets: BREEAM vs Total
BREEAM - London Submarket Clusters
London Southbank
London West End
London Docklands
London City
London Midtown
London M25 Corridor SW
London Fringe
London M25 Corridor SE
London Western Corridor
London M25 Corridor NW
0 5 10 15 20 25 30 35 40
% BREEAM
Status Area (SF)BREEAM 25694206All market 95017697
Total Rentable Building Area: BREEAM vs Total
Approximately 27%
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
Green office rentable space in London
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20130
500000
1000000
1500000
2000000
2500000
3000000
3500000
4000000
4500000
0
5000000
10000000
15000000
20000000
25000000
BREEAM C-BREEAM
Research Agenda
Green office submarket development Identification of green office submarket Dynamics of green office submarket
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
Identifying Green Office Submarket
Nature of occupiers
Non-substitutability
potential
GREEN OFFICE
SUBMARKET
Office relocation
pattern
Identification matrix
Dynamics of Green Office Submarket Modeling based on:
Endogenous variables from both submarkets
- demand, supply and rent Exogenous variables: macroeconomic indicators
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
THANKS FOR LISTENING