Building Performance and Energy Star Ratings in Commercial Office Space

Literature surrounding the topic of environmental certification programs has consistently shown that green buildings financially outperform non-green buildings. Financial performance and energy performance go hand-in-hand when studying commercial real estate, as markets are dominated by institutional and private investors seeking the highest financial returns. Financial performance is the single greatest motivator for firms to implement sustainable initiatives as profit generation takes utmost priority. However, many indications suggest that environmental certification programs are simply branding techniques that do not meet expectations for energy performance. This study examines over 783 million ft2 of office space across four major metropolitan markets to understand greenhouse gas intensity levels as they relate to Energy Star ratings. This study finds that buildings ranked at the highest level by Energy Star underperform those with slightly lower scores, suggesting there is an underlying issue not captured by Energy Star performance measurement. Two main explanations for the results were rating inflation and over consumption of product. The paper argues that the current Energy Star rating system lacks a complete understanding of building performance and highlights the issues that can arise as they relate to financial performance