Tenants’ Motivations to Lease Green Office Buildings: an Exploratory Study of Sydney Central Business District

Abstract

Environmentally friendly and energy efficient green buildings have gained their popularity across many countries including Australia. Despite their increasing popularity and rental premium, it is not known why tenants are more inclined to lease green over non-green office buildings in Australia. In addressing this gap, this study aims to explore tenants’ motivations to leasing green office buildings. To this, this study first analysed over 2,000 tenants occupying over 100 green buildings in Sydney CBD. This allowed this study to identify which tenants are more likely lease green buildings than the others. The results show that tenants from; (i) the Finance and Insurance services sector, (ii) the Professional, Scientific and Technical services sector, and (iii) Real estate services sector account for over 50% of the entire tenant sample. Then, a judgemental purposive sampling method was adopted, and nine interviews were conducted with the key leasing decision-makers from the top three sectors. The interview findings reveal that the traditional aspects of location and costs are still the key motivational factors for green building tenants. However, many interviewees acknowledge that leasing a green office space could help improving their corporate image. This thus led to many tenants’ beliefs that green spaces contain both symbolic value and tangible value, and that higher rents for green buildings are rather acceptable considering what they can offer. The results of the study suggest that understanding the demand of various types of tenants is essential to shed the light on the expensive rental price of green buildings in Australia. 