The presence of natural light in indoor spaces improves human health, well being, and productivity: do the social benefits of daylight translate into economic value as measured by what office tenants are willing to pay? This research explores the involved processes of measuring the effects of daylight on the New York real estate commercial market and ultimately why real estate stakeholders should pay attention to this design necessity.
It is a well-known fact that daylight has a positive impact on human well being. In particular to workspaces, natural light leads to greater workplace productivity, decreased stress, and higher employee satisfaction. Examing into historical context, daylight is viewed not as an amenity, but a right and necessity, shown through various litigations and regulations that now shape today’s zoning practices – most notably regulations of 1916 and 1961 in New York City aiming to minimize shading to ensure daylight reaches pedestrians on the street by stipulating rules about the exterior form of buildings. In addition to human health, daylight is also a fundamental component of building sustainability (LEED & WELL Building standards), which adds to both an environmental and social standpoint.
Yet, there has never been a detailed analysis of the economic valuation of daylight. As we dig deeper into the implications of this analysis, we start to understand why there has not yet been research that quantifies the impact of daylight performance on rent prices, nor the value of daylight distribution within specific floors. While there has been a lot of work done to evaluate the economic incentive of individual design measures that contribute to the overall sustainability of buildings, the individual metrics are usually easier to quantify: energy efficiency, walkability, and transportation access.
To identify the economic impact of natural daylight on real estate value, we measure the differences in rent between office spaces that have high daylight access and those with low daylight access.
This research models daylight distribution in 5,145 commercial office spaces in Manhattan in New York City. These results then get inserted into a hedonic pricing model with multiple regressions. Holding all other factors constant, we can then identify the marginal value of daylight in the office rental prices. From this, we can derive two things: (1) the value of daylight in rental prices of office spaces, and (2) a city-wide assessment of spatially-distributed daylight performance in office spaces in Manhattan.
This research also shows a 5 to 6% financial premium for daylight in office rent prices which indicates that people value natural light within indoor spaces, independent of all other factors, including LEED certification and floor number.
Most interestingly, the research reflects that 74% of the floors throughout this Manhattan sample have daylight autonomy levels below the LEED threshold, and only a quarter of offices meet the minimum 55% sDA 300/50% threshold that is widely used as best practice within the building sector. In addition, there is a 5 to 6% financial premium for daylight in office rent prices which indicates that people value natural light within indoor spaces, independent of all other factors, including LEED certification and floor number.
While the social and well-being implications of daylight are universally understood, the financial impacts of daylight have not always been seriously considered in a development budget. This study helps underline the importance of daylight design and more importantly, retain daylight-optimizing design elements in a project for a real estate developer. The added value of rent prices can help offset potential costs associated, as well as help to inform building and planning policies to equalize rent prices and ensure that daylight is available to all.
This work measures how much potential daylight might enter an office (at leasing), as it does not take into account furniture, partition walls, and window treatments that specific tenants would add which could affect light quality.
This is the first research to simulate hourly illuminance values to account for both direct and diffuse light.
This work separates daylight from ‘view’ premiums as there is a need for better analysis methods and metrics to evaluate views in economic terms.
While this study focuses on Manhattan, this research expects this to be relevant for cities around the world.