sustainability consultant dealing with new and existing buildings, I am often asked whether LEED certifications increase the value of buildings. Though my response typically begins with “It’s still too early to tell,” the ensuing discussion always focuses on the fundamentals that really matter when valuing buildings and their alignment with LEED certification.

As of the first of October, only 60 projects in the world have been LEED-certified for 10 years or longer, which is a relatively short time when assessing the documented value of a building. However, we can study the elements that typically play into building valuation and, with more than 19,000 certified commercial projects now in existence, we are reaching a point where building transactions include a good mix of LEED-certified buildings.

How the relatively new dynamic of LEED certifications affects the commercial real estate market depends heavily on one group of players: building appraisers.


The value of a building is somewhat subjective and largely depends on the perspective: owner versus user.

For a building user, the value may hinge on factors such as building aesthetics, location and quality of indoor environment. In some cases, visible sustainable features such as vegetated roof gardens and solar panels that emphasize a corporate brand also affect building value.

Less discussed, but more precisely measured and articulated, is a building’s value to its owners, developers and investors. In this case, value is the function of a calculation based on occupancy rate, market forces and, above all, net operating income (NOI). In short, the lower the costs, the higher the NOI, and the higher the building’s value.


Regardless of which definition of value is important to you, LEED certification is likely to increase building value.

Unlike the residential market, commercial building appraisers rely heavily on at least three years of hard data on income and operating expenses to calculate an anticipated building value. LEED-certified buildings are designed to reduce operating costs by 10 percent or more compared with traditional buildings, increasing NOI and therefore value for owners.

Appraisers should also credit the value of the building for other LEED elements included that don’t always have a direct financial impact to building owners but instead increase users’ value of the building. However, it remains to be seen whether building appraisers will value these sustainable features consistently.


For LEED certifications to make business sense and environmental sense, I advise building owners to target LEED features and strategies that help optimize rental rates while minimizing operating costs, addressing both definitions of value. The features can vary depending on the real estate market and the tenants’ industries.

For investors seeking to reposition undervalued existing buildings, LEED for Existing Buildings certification can lower operating costs and add value by distinguishing a previously nondescript building.

While it is still too early in our market to tell definitively, we should expect to see a trend of increasing sales prices for LEED-certified buildings as our collection of certified buildings grows. The fundamentals of LEED certification and building valuation are in sync and bring myriad benefits for all those involved with the building.

Mike Leonard is the director of greenSTUDIO, a division of Hastings Architecture Associates. He was among the first architects in Tennessee to earn the LEED Accredited Professional credential.

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  • September 29, 2020
    4:30 pm - 6:30 pm

Finishing out September small social gatherings with a  September Happy Hour. Please join us a the rockin’ restaurant Sambuca’s , located in the Gulch. This too is an in person meeting , but only has seating for 50 people. We will continue our discussion of the new IFMA Nashville meeting format, locations, special events. a (more…) →

  • October 12, 2020
    8:00 am - 5:00 pm

Please join us for a day of golf Monday, October 12th, 2020! CSI and IFMA are excited to co-host our annual golf outing at Gaylord Springs Golf Course