Environmental Performance and the Cost of Capital: Evidence from Commercial Mortgages and REIT Bonds

Working paper (March 2017), together with Piet Eichholtz, Nils Kok (Maastricht University) and Erkan Yönder (Oyzegin University).


The increasing societal focus on environmental issues has led to differentiated corporate action as a response. This paper studies the impact of corporate environmental performance on cost of capital, using Real Estate Investment Trusts (REITs) as a laboratory. We document that loans on environmentally certified buildings command 25-31 basis point lower spreads. At the corporate level, REITs with a higher fraction of environmentally certified buildings issue bonds at lower spreads, an analysis of bond spreads in the secondary market corroborates this finding. The results provide evidence on the efficiency of the capital market in pricing risk-affecting environmental characteristics.

On the Value of Environmental Certification in the Commercial Real Estate Market

Working paper (January 2017), together with Nils Kok (Maastricht University).


A significant part of the global carbon externality stems from buildings. Environmental certification is often hailed as an effective means to resolve the information asymmetry that may prevent markets from effectively pricing the energy performance of buildings. This study analyzes the adoption and financial outcomes of environmentally certified commercial real estate over time. We document that nearly 40 percent of space in the 30 largest U.S. commercial real estate markets holds some kind of environmental certification in 2014, as compared to less than 5 percent in 2005. Tracking the rental growth of some 26,000 office buildings, we then measure the performance of environmentally certified real estate over time. We document that certified office buildings, on average, have slightly higher rental, occupancy and pricing levels, but do not outperform non-certified buildings in rental growth over the 2004-2013 period. Further performance attribution analysis indicates that local climatic conditions, local energy prices and the extent of certification lead to significant heterogeneity in market pricing. On aggregate, these findings provide some evidence on the efficiency of the market in the adoption and capitalization of environmental characteristics in the commercial real estate market.

Green Building Adoption Index 2016

Today we released the Green Building Adoption Index 2016! This is a project in cooperation with the research team of CBRE, led by David Pogue, and my colleague Nils Kok (Maastricht University).

This year's release features an online tool (included below) which maps all the certified buildings that are included in the index, and displays the individual market reports. The national results can be downloaded by using this link, and the official press release can be found here.

Energy Efficiency and Economic Value in Affordable Housing

One of my research papers has been accepted for publication in Energy Policy, this is joint work with Piet Eichholtz (Maastricht Univeristy) and Andrea Chegut (MIT):


Strong rental protection in the affordable housing market often prohibits landlords from charging rental premiums for energy-efficient dwellings. This may impede (re)development of energy efficient affordable housing. In the Netherlands, affordable housing institutions regularly sell dwellings from their housing stock to individual households. If they can sell energy efficient dwellings at a premium, this may stimulate investments in the environmental performance of homes.

We analyze the value effects of energy efficiency in the affordable housing market, by using a sample of 17,835 homes sold by Dutch affordable housing institutions in the period between 2008 and 2013. We use Energy Performance Certificates to determine the value of energy efficiency in these transactions. We document that dwellings with high energy efficiency sell for 2.0–6.3% more compared to otherwise similar dwellings with low energy efficiency. This implies a premium of some EUR 3,000 to EUR 9,700 for highly energy efficient affordable housing.

Full paper: Chegut, Eichholtz, Holtermans (2016)

Information Asymmetry and Sustainability in Real Estate Markets

After years of hard work, and having had the opportunity to travel the world and visit with great institutions, on June 23, 2016 it was finally time to defend my dissertation entitled "Information Asymmetry and Sustainability in Real Estate Markets." Economisch Statistische Berichten, a Dutch magazine for economists published a nice one-page summary on my dissertation (unfortunately only in Dutch). 

Full dissertation: Holtermans (2016)


The Economic Effects of Owner Distance and Local Property Management in U.S. Office Markets

One of my research papers has been accepted for publication in the Journal of Economic Geography, this is joint work with Piet Eichholtz (Maastricht University) and Erkan Yönder (Oyzegin University):


Using a large dataset of U.S. offices we analyse the relationship between investors' distance to their assets and the effective rent of these assets, and study the extent to which property managers can influence this relationship. We construct hedonic rent models to control for other known rent determinants. It turns out that proximity matters: holding everything else constant, investors located closely to their office buildings are able to extract significantly higher effective rents from these assets, especially if these buildings are of low quality. This effect is due to significant differences in occupancy levels. Interestingly, property managers can affect this relationship, mitigating the adverse effects of investor distance on effective office rents. Especially if the owner does not reside in the same state as the building, external property management is of importance, most prominently so for class-B office buildings.

Full paper: Eichholtz, Holtermans, and Yönder (2016)