Working Paper Series,
Royal Institute of Technology, Department of Real Estate and Construction Management & Banking and Finance

Abstract: This study investigates whether energy use and recommended efficiency measures are capitalized into office building transaction prices in Sweden, amid the European real estate sector’s transition following the Energy Performance of Buildings Directive (EPBD). Using eight years of transaction data and a hedonic pricing model, the analysis quantifies the relationship between energy-related characteristics and market value. Complementary interviews with energy consultants provide insights into how energy measures are interpreted and applied in practice. Results show that while energy efficiency is increasingly considered in investments, its influence on prices is limited and varies across segments. Unexpectedly, higher energy use correlates with higher prices in some cases. A 1% increase in energy use corresponds to a 0.22% price increase per square meter, especially in older buildings and peripheral areas. This suggests energy inefficiency may be offset by other value drivers, such as location, historical character and redevelopment potential. The market response to EPC-recommended measures is more nuanced. Construction-related upgrades can command premiums in older buildings due to their future value potential. Conversely, installation measures are often viewed as costly liabilities, leading to price discounts. These findings reveal a distinction between flexible investment opportunities and immediate capital expenditures. By combining quantitative and qualitative methods, the study offers a comprehensive assessment of energy efficiency’s economic and operational dimensions. It contributes to the literature on green value premiums and provides actionable insights for stakeholders. At the same time, it highlights the specific dynamics of a low-energy-price context like Sweden. This adds important geographical nuance to a field often dominated by evidence from higher-cost markets.

Keywords: Energy use; energy efficiency; commercial real estate; transaction price; energy efficiency measures; EPBD

JEL-codes: D25; D81; Q40; Q51; R32

Language: English

29 pages, June 10, 2025

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