In this paper, we analyze 61 core-based statistical areas of Leadership in Energy and Environmental Design (LEED) registration that occurred between 2005 and 2010, alongsid the impact of societal green sentiment and government policymaking in support of the diffusion of green buildings, based on owner types. Our Green Sentiment Index, based on online search activities, reflects societal environmental awareness in various regions of the United States over time. Using Google Trends data and a count regression approach, we identify a significant positive influence of both green sentiment and green policies on the registration of LEED properties. The findings suggest that increased green sentiment softens governmental policy and procurement, as well as corporate investment decisions. This approach can aid corporate actors and policymakers to meet both social demand and political objectives for increasing the prevalence of green buildings.

1. Green Diffusion:
Determining the Diffusion of Green Buildings in the US
Thomas Braun | Marcelo Cajias | Ralf Hohenstatt
European Real Estate Society ERES – Conference 2012
Edinburgh, UK – June 2012
Supported by:

2. 2Braun | Cajias | Hohenstatt
1. Introduction: Understanding the Mechanisms behind
2. Hypothesis
3. Research Approach
4. Results
5. Conclusion
Agenda

3. 3Braun | Cajias | Hohenstatt
Dispersion Pattern – LEED-Registered Buildings
2003

4. 4Braun | Cajias | Hohenstatt
Dispersion Pattern – LEED-Registered Buildings
2007

5. 5Braun | Cajias | Hohenstatt
Dispersion Pattern – LEED-Registered Buildings
2010

6. 6Braun | Cajias | Hohenstatt
EXTERNAL DRIVERS
Corporate Level
Portfolio Level
Drivers of Green Buildings
Property Level
Increased
Rental
Income
Decreased
Risks
Increased
Property
Values
Decreased
Property
Costs
Portfolio Level
Company Level
Government
Society
Economic
Framework
INTERNAL DRIVERS

7. 7Braun | Cajias | Hohenstatt
Adoption
Rejection
Investment
Decision
The Relative Advantage of Green Buildings for
Profit-Organizations – A Microeconomic Foundation
RATIONALITY
EXTERNALITY
SENTIMENT
Payback
Period
Willingness
To Pay
Short-Run
Profitability
Intangible/ Long-Run
Profitability

8. 8Braun | Cajias | Hohenstatt
Adoption
Rejection
Decomposing the Green Building Decision Process
for Profit-Organizations according to Rogers
Knowledge Persuasion Decision
Implemen-
tation Confirmation
Communication Channels
Perceived Characteristics of
the Innovation:
1. Relative Advantage
2. Compatibility
3. Complexity
4. Trialability
5. Observability
Prior Conditions
1. Previous
Practice
2. Felt Needs/
Problems
3. Innovative-
ness
4. Norms of the
Social System
Registration
Date
Certification
Date
Communication Channels
Perceived Characteristics of
the Innovation:
1. Relative Advantage
2. Compatibility
3. Complexity
4. Trialability
5. Observability
Research Questions:
 What determines the Diffusion of Profit-Organization-owned Green Buildings?
 Which Role do Green Variables play? – Green Sentiment, Green Building Policies?
Prior Conditions
1. Previous
Practice
2. Felt Needs/
Problems
3. Innovative-
ness
4. Norms of the
Social System
Prior Conditions
1. Previous
Practice
2. Felt Needs/
Problems
3. Innovative-
ness
4. Norms of the
Social System
Perceived Characteristics of
the Innovation:
1. Relative Advantage
2. Compatibility
3. Complexity
4. Trialability
5. Observability
Characteristics
of the Decision-
Making Unit
Characteristics
of the Decision-
Making Unit
Characteristics
of the Decision-
Making Unit
Green
Sentiment
Green Building Policies

9. 9Braun | Cajias | Hohenstatt
Dispersion Pattern
– LEED-Registered Buildings
2010

10. 10Braun | Cajias | Hohenstatt
Dispersion Pattern by Owner-Type
– LEED-Registered Buildings
2010
LEGEND
LEED-Reg. Government-owned
LEED-Reg. Profit-Org.-owned

11. 11Braun | Cajias | Hohenstatt
The Relative Advantage of Green Buildings
for Government
Decision
Resource
Depletion
Climate
Change
Greenhouse
Gases
Green
Sentiment
Pioneering
Role
Reelection
Intermetropolitan
Competition
Risk of
Vote Out

12. 12Braun | Cajias | Hohenstatt
 Profit-Organization-Owned Green Buildings:
 Green Building Policy  Rising Short-Run Return  Adoption/ Diffusion
 Green Sentiment  Rising Intangible/ Long-Run Return  Adoption/ Diffusion
 Government-Owned Green Buildings:
 Greenhouse Gases  Pioneering Role  Adoption/ Diffusion
 Green Sentiment  Risk of Voting Out  Adoption/ Diffusion
Hypothesis

13. 13Braun | Cajias | Hohenstatt
 Focus on the temporal dimension: Quarterly Diffusion from 2005 to 2010
 5-quarter lag-structure with quarterly as well as regional fixed effects
 Green intention describes the diffusion  Registration date
 Differing determinants/ mechanisms  Subsampling: Profit, Governmental, Office
 Each investment decision is equitable (regardless of a square feet weighting!)
 CBSA-level
 No market share  Count Regression Approach
Research Approach

14. 14Braun | Cajias | Hohenstatt
Diffusion of Green Buildings from Q1/2005-Q4/2010
CBSA
TIME
GreenStock
CBSA
TIME
GreenStock
Governmental Green Stock Profit Green Stock

15. 15Braun | Cajias | Hohenstatt
Spatial Concentration of Green Buildings
from Q1/2005-Q4/2010
Green Building Concentration
Concentration
All CBSAs
Sample
Office
Profit
Governmental
2005_Q1
2005_Q4
2006_Q4
2007_Q4
2008_Q4
2009_Q4
2010_Q4
0.40.50.60.70.80.91.0
Green Building Concentration
Concentration
CBSAs with Policies
Sample
Office
Profit
Governmental
2005_Q1
2005_Q4
2006_Q4
2007_Q4
2008_Q4
2009_Q4
2010_Q4
0.40.50.60.70.80.91.0
Green Building Concentration
Concentration
CBSAs without Policies
Sample
Office
Profit
Governmental
2005_Q1
2005_Q4
2006_Q4
2007_Q4
2008_Q4
2009_Q4
2010_Q4
0.40.50.60.70.80.91.0

16. 16Braun | Cajias | Hohenstatt
Diffusion
Process
Profit Green
Building Stock
Office Green
Building Stock
Governmental
Green Building
Stock
Equation
and
Parameters
Number of Buildings Number of Buildings Number of Buildings
Estimate / Str. Error Estimate / Str. Error Estimate/ Str. Error
Intercept -46.105***
(4.071)
-37.291***
(4.026)
-43.482***
(5.066)
Explanatory Variables
log(Income) t-5
4.975***
(0.399)
4.694***
(0.393)
0.801***
(0.078)
log(Pop) t-5
-4.408***
(0.424)
-4.240***
(0.443)
Sentiment t-5
0.512***
(0.132)
0.324**
(0.131)
0.946***
(0.164)
log(Market
Size) t-5
0.660***
(0.208)
0.614**
(0.271)
RE
Performance t-
5
-0.101***
(0.014)
-0.088***
(0.014)
CO2
Emissions t-5
0.445
(0.511)
-0.428
(0.522)
1.616**
(0.711)
Green
Policies t-5
0.609***
(0.091)
0.642***
(0.093)
Log(theta) 0.437***
(3.515)
0.693***
(5.115)
0.140
(0.730)
Theta 1.548 1.999 1.150
Log-
likelihood
-1442 -1429
-1299
df 20 20 13
AIC 2916.835 2861.025 2622.361
Count Regression Approach

17. 17Braun | Cajias | Hohenstatt
Conclusion
 Diffusion Mechanism and Dispersion Patterns by Owner-Type differ
 Profit-Organization-owned Green Building Stock is more concentrated than the governmental
 Confirmation of the Diffusion-Hypothesis:
 The incentivization by Green Building Policies is essential for the diffusion in the profit
sector (and reasonable in the governmental sector)
 Green Sentiment is promotional for the diffusion either for the profit or for the
governmental sector
 Ongoing Climate Change (CO2) is supportive for the diffusion in the governmental
sector

18. 18Braun | Cajias | Hohenstatt
Thank you! Any comments?
Thomas Braun
Marcelo Cajias
Ralf Hohenstatt
Competence Center of Sustainable Real Estate
Universitätsstraße 31
D-93040 Regensburg
T: +49 941/943 6014
F: +49 941/943 816013
E: thomas.braun@irebs.de
www.irebs.de
Contact