EPConomics: Unveiling the economic potential of energy efficiency in Dutch retail real estate
J.S. Zhang (TU Delft - Technology, Policy and Management)
K. Qian – Mentor (Design & Construction Management)
H. Ward – Graduation committee member (Universiteit Leiden)
P. Eichholtz – Coach (Universiteit Maastricht)
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Abstract
The quest for environmentally conscious practices has become a paramount concern in the real estate sector, with a growing emphasis on reducing carbon emissions, as they are found to be responsible for a significant 36 percent of total global energy consumption. Energy Performance Certificates (EPCs) play a crucial role in advancing energy efficiency and facilitating the seamless transition toward achieving overarching national and EU regulatory energy goals. A growing body of research has explored the connection between energy performance attributes and the impact of EPCs. Although these studies consistently reveal the existence of a pricing effect, more recent investigations suggest that the relationship is intricate and inconclusive, especially when considering data constraints and varying model specifications.
In this research, compelling evidence is presented regarding the economic advantages of EPCs in the Dutch retail market. The study draws from the principles of Industrial Ecology, with a specific emphasis on understanding the systemic relationships between society, the economy, and the natural environment. By analyzing historical rental and sale market transactions from 2015 to 2021, this research presents some of the earliest evidence on the economic value of energy certification in the retail sector. Stationary premia for higher EPC-certified rental transactions are roughly 11 percent, on a price per square meter basis. Selling prices of energy-efficient transactions are more marginal and complex, especially in light of data constraints and changing model specifications. This linkage between sustainability and financial benefits creates a strong incentive for investors, and businesses, alike to adopt energy-efficient measures, since currently, substantial upfront, often on-balance, capital costs are incurred to carry out energy retrofits of existing building stock. This study also stands out as one of the first to conduct spatial analyses of EPCs for the retail sector, providing valuable insights for informed policy-making while considering geographic variation. The absence of a concrete plan within Dutch national regulations for enhancing energy efficiency in retail buildings and aligning them with overarching climate goals in the built environment underscores the importance of this study. In the new age of economic activities where transparency is the zeitgeist, this research provides empirical evidence to mobilize responsible investments into energy-efficient buildings and shift the paradigm from merely managing downside risks to benefiting stakeholders and improving capital efficiency.