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RP3031: Conference Paper: Bundling and splitting: Workspace tenure in two vectors

The relationship between levels of energy efficiency and differing forms of commercial office workspace tenure is theoretically affected by the economic principal-agent problems of moral hazard and adverse selection. Tenure involving contracts gross with energy utilities is subject to the moral hazard of overconsumption of energy which results in lower measures of energy efficiency. Tenure involving contracts net of energy utilities is subject to underinvestment in energy efficiency leading to the adverse selection of buildings put to market. Both these problems are theoretically mitigated by information sharing, that is by “disclosure” between principal and agent.

Past empirical research has measured the relationship between energy efficiency and differing contract types. A gap in this research is the inclusion of information-age workspace tenure subject to not just one, but multiple contracts, multiple associated principal agent problems, and the effect to which total energy efficiency has been affected by the presence, or absence of disclosure. To fill this gap a conceptual framework for future empirical research is presented. 

Tenure is described in two vectors: bundling and splitting. Using a measure of tenure energy efficiency based upon that of the mandatory National Australian Built Environment Rating System, this framework is then used to derive hypotheses concerning the empirical measurement of the relationship between levels of energy efficiency in commercial office workspace tenure, involving either owner occupancy, and gross or net contracts or some combination of the two.

This paper is to be presented at the Asian Real Estate Society Conference, Shenzhen, July 2019 (following CRCLCL official closure).

undling and splitting: Workspace tenure in two vectors (422868 PDF)

RP3031: Information, Risk and Retrofit: Energy/Carbon Disclosure at the Building Retrofit Investor – User interface