Portfolio greenness and the financial performance of REITs

P.M.A. Eichholtz*, N. Kok, E. Yonder

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review

46 Citations (Web of Science)


This paper investigates the effects of the energy efficiency and sustainability of commercial properties on the operating and stock performance of a sample of US REITs, providing insight into the net benefits of green buildings. We match data on LEED- and Energy Star-certified buildings with detailed information on REIT portfolios and calculate the share of green properties for each REIT over the 2000-2011 period. We estimate a two-stage regression model and document that the greenness of REITs is positively related to three measures of operating performance - return on assets, return on equity and the ratio of funds from operations to total revenue. We also document that there is no significant relationship between the greenness of property portfolios and abnormal stock returns, suggesting that stock prices already reflect the higher cash flows deriving from investments in more efficient properties. However, REITs with a higher fraction of green properties display significantly lower market betas. 

Original languageEnglish
Pages (from-to)1911-1929
Number of pages19
JournalJournal of International Money and Finance
Issue number7
Publication statusPublished - Nov 2012


  • Energy efficiency
  • Real estate
  • REITs
  • LEED
  • Energy Star

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