WHY DO COMPANIES RENT GREEN ? REAL PROPERTY AND CORPORATE SOCIAL RESPONSIBILITY by Piet Eichholtz Nils Kok

This paper provides the first systematic analysis of the choice of green office space by commercial tenants. We analyze the decisions of more than 11,000 tenants to choose office space in green buildings or in otherwise comparable non-green buildings located nearby. We formulate six propositions to explain why specific firms and industries may be more likely to lease green space. We test these propositions using the tenants in a matched sample of more than 1,100 green office buildings and 3,900 nearby non-green buildings. We analyze variations in the occupancy of green office space across firms and industries, identifying those firms which have the highest occupancy in green buildings and those firms whose office utilization is more heavily concentrated in green buildings. We also identify the industries with the largest occupancy in green buildings and those industries whose space utilization is more heavily concentrated in green buildings. We find that corporations in the oil and banking industries, as well as government-related and non-profit organizations, are among the most prominent green tenants. After appropriately controlling for building quality and for specific locations within one quarter mile, we find that firms in mining and construction and organizations in public administration are relatively more likely to rent green. The empirical analysis shows that tenants in these industry groups are significantly more likely to occupy green office space.