# Economic Efficiency of Green Buildings - Essay Example

Summary
This essay analyses the environmental value of green buildings. Green buildings not only have a higher net operating income, but also a lower risk premium. It shows how green buildings generate more revenue by reducing various expenses, and how they have a lower capitalization…

## Extract of sample "Economic Efficiency of Green Buildings"

Download file to see previous pages We can get information about the environmental performance of CASBEE certified buildings by accessing their certification reports. Also, the cash flow information about some CASBEE buildings, which are owned by real estate investment trusts, is available in their respective financial reports.
An analysis to segregate conventional and green buildings was first conducted on all properties held by the Japanese Real Estate Investment Trusts (J-REITs). The data for properties were collected based on the latest financial reports as of March 2011. It was found that out of total 1822 properties held by 35 REITs, 23 are CASBEE certified buildings (Table 1). For further analysis then, the 1799 in-CASBEE certified building was considered as conventional, the 23 CASBEE certified buildings were considered as “green buildings “ for the purposes of this analysis.
To determine economic performance, one can use the capitalization rate, calculated by dividing the net operating income by the appraisal value. The capitalization rate is the rate of return on investment, which is commonly used by investors to determine profitability.
The first analysis was conducted in order to determine if there is a dissimilarity of capitalization rate between CASBEE certified buildings (green buildings) and non-certified buildings (conventional buildings). Table 2 represents basic statistical information such as sample size, mean, standard deviations, and standard error mean for both the dataset.
The test statistic of the test of the difference between two population means depends on whether or not this hypothesis is rejected. Since this output, the result shows that p-value 0.052 > significance level 0.05, this hypothesis cannot be rejected. Therefore, we can conclude that the populations have equal variances.
“Hypothesis Ho: the population means of the two groups are equal”.   ...Download file to see next pagesRead More
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