This study challenges the static treatment of the “green premium” in commercial real estate. We introduce and empirically test the Sustainability Value Decomposition Framework , which disaggregates sustainability-related valuation effects into signalling, performance, and market-access components: Signalling (the value of the label), Performance (the value of operational efficiency), and Market Access (the value of regulatory compliance). Using a mixed-methods approach that combines econometric analysis of 111 institutional office transactions in London with an instrumental-variable strategy, we strengthen identification of the certification effect while recognising the remaining assumptions required for causal interpretation. Our 2SLS model estimates an IV-based premium of 9.5% for top-tier BREEAM certification, conditional on the validity of the local planning-authority instrument. Mediation analysis suggests that EPC ratings, interpreted as market-perceived energy-performance and compliance proxies, statistically account for approximately 65.2% of the observed BREEAM-value association. We also provide a sizeable “brown discount” in a major European market, documenting a 24.7% valuation penalty for assets non-compliant with minimum energy standards, consistent with a Market Access effect. These findings suggest that sustainability-related pricing in mature office markets increasingly reflects market-perceived performance and regulatory risk, rather than certification labels alone.
Valero et al. (Mon,) studied this question.