Indoor and outdoor health factors in the pricing of commercial real estate: A hedonic analysis of U.S. office buildings

Research on the connection between occupant health and the financial performance of commercial buildings is scarce. This study tests the willingness to pay for health-promoting features and estimates the relative contribution of indoor and outdoor features. For this purpose, a hedonic framework is applied to assess the effect of different attributes on prices. Based on a proprietary, assembled dataset of physical and financial characteristics, a sample of health-certified U.S. office buildings is compared to a large sample of non-certified buildings in the same markets. Potential biases are mitigated by statistical methods such as panel data estimation and propensity score matching. Health-certified offices are found to achieve a rental premium of 4-6 % on average, across model specifications. In addition, proximity to health services and an encouraging environment for active transport modes of commuting tend to increase office rents while outdoor air quality and hospital quality ratings yield mixed results. Comparing the individual price effects of indoor and outdoor health-related features shows that higher active commuting scores or walkability have the strongest positive association with office rents. Overall, both indoor and outdoor health-related features are found to drive rental rates, but it appears that neighborhood characteristics exert a larger cumulative impact on rent than building health certification. Our findings suggest that health aspects of the built environment, although not widely monitored or tracked by owners or tenants, are nonetheless valued and reflected in pricing within the analyzed office markets.