The Rental Premium Effect: Quantifying the Value of Certified Real Estate
- peterhhowle
- Sep 29
- 3 min read
Updated: Oct 2
Sustainability has evolved from the fringes to being a core driver of financial performance. For much of the past decade, green building certifications were seen as a reputational badge, a way for owners to signal virtue to tenants and investors. Today, they are increasingly treated as financial instruments, with certified assets showing consistent rental uplifts and stronger liquidity in capital markets.
Structural Shift
Europe’s real estate sector is undergoing rapid change. Regulators are tightening energy efficiency standards, investors are under pressure to report against the EU taxonomy and SFDR, and corporate tenants are scrambling to demonstrate progress towards their own climate commitments. Certification schemes such as BREEAM In-Use (BiU) provide a ready-made benchmark, translating building-level performance into comparable data.
The numbers are striking. Sustainalytica’s analysis of BRE data shows that the total volume of BiU certifications achieved has risen from just over 37,000 in 2020 to more than 175,000 in 2023—a nearly fivefold increase in three years. Such growth reflects not fashion but institutionalisation: a recognition that sustainability is no longer a soft metric but a core determinant of asset value.
"The total volume of BiU certifications achieved has risen from just over 37,000 in 2020 to more than 175,000 in 2023—a nearly fivefold increase in three years."
Why Certification Translates to Rental Premiums
Three dynamics explain why certified assets tend to command higher rents:
Tenant Demand – Large occupiers increasingly prefer certified space, benefitting ease of alignment with their own corporate ESG objectives. This deeper demand pool gives landlords greater pricing power.
Risk Management – With energy standards tightening across the EU, uncertified assets face higher risk of obsolescence. Certification signals compliance, reducing the chance of sudden value erosion.
Scarcity Premium – Certified assets remain in shorter supply. This scarcity allows owners to reduce incentives and achieve rents above local averages.
The Evidence Base
The empirical case for a rental premium is strong. A meta-analysis of more than 70 academic studies (2023) found that 77% reported statistically significant uplifts in rent for certified buildings.[1] A University of Reading study (2019) identified premiums of 23–26% for BREEAM-rated assets compared with uncertified stock.[2]
This is borne out in sectoral trends. Logistics and hospitality, once laggards, are experiencing steep growth in certification as both regulatory scrutiny and tenant expectations intensify. Investors in those sectors have begun to close the gap with offices and residential, which were early adopters.
Why BREEAM In-Use Matters
A burgeoning choice of green building certifications exist, but BiU has become Europe’s default for operational assets. Unlike LEED O+M, which is rooted in North American standards, BiU aligns closely with European regulations and investor disclosure frameworks. Its two-part structure—covering both Asset Performance and Management Performance—also provides a depth that appeals to institutional capital.
As Peter Howle, Founder & CEO of Sustainalytica, puts it:
“BREEAM In-Use is not just an ESG label. It is a financial mechanism that drives value and protects against risk.”
Implications for Investors
For investors, the implications are straightforward:
Income: Certified assets command higher rents and stronger occupancy.
Valuation: Rental premiums flow through to yield compression, bolstering capital values.
Liquidity: Buyers increasingly screen for certification; uncertified assets risk slower exits or discounted pricing.
In a market where regulation is ratcheting up and occupiers are more selective, the absence of certification is becoming a visible liability.
Looking Ahead
The surge in BiU certifications since 2020 is unlikely to abate. Owners are shifting from one-off assessments to portfolio-level strategies, aiming for consistent coverage across asset types. This reflects a recognition that certification is not just about compliance but about systematising value creation and risk management.
Conclusion
The rental premium effect is no longer conjecture. Academic research and market adoption both point to the same conclusion: certified real estate outperforms.
For investors, certification is simultaneously a hedge against regulatory and obsolescence risk, and a lever to capture income growth. In that sense, BREEAM In-Use has become less an optional label than a requirement for prudent asset management.
[1]https://www.researchgate.net/publication/373895611_Impact_of_green_building_certification_on_the_rent_of_commercial_properties_A_review
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