The Green Rental Market: Green Apartments Increase Market Share and Fetch Higher Rents

December 21, 2016

“Green building” is most often associated with commercial buildings, public buildings, and privately owned homes, but according to a recent study, the American rental market is getting greener. According to a study by RENTCafe and YardiMatrix, the number of LEED-certified apartment units has grown significantly since 2008, with the number of new, LEED apartments rising by an estimated 32% in 2016. Chicago, IL has the most green certified apartments, with 13,800 LEED-certified rental units on the market, while Cambridge, MA has the most green units per person.

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Green apartment living does come with a premium cost. Green-certified apartments bring in higher rents than conventionally built apartments, and the cost difference varies by city. The average rent for a green certified apartment is, on average, $560 more per month than a non-green certified apartment.

Renters generally expressed an interest in green-certified apartments, but a majority of those surveyed indicated a willingness to pay only $100 per month in rent for a green apartment. And yet, a 2012 study in San Diego found that green apartments outperform their non-sustainable counterparts not only in rent, but also in vacancy rates.

Beyond the fact that there is a demand for green, sustainable rental units, is there a difference between the rental premium for LEED-certified or otherwise green-certified buildings and sustainable and energy efficient (SEE) buildings that did not pursue third-party certification? A 2015 study found that, while apartment buildings built with SEE principles did fetch higher rents than non-SEE buildings by 4.7%, the rent premium was double for LEED-certified buildings.

Going green is an investment that can save money over time by reducing energy and other operating costs, and for building owners, going through the process of obtaining LEED certification for a multi-family apartment building can bring in higher rents and reduce vacancy rates.

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