JLL research analyzes three key factors owners and occupiers
must consider in decision-making
CHICAGO, Nov. 28,
2023 /PRNewswire/ -- The current economic environment
is creating challenges for investors and occupiers to make the case
for investing in retrofitting and futureproofing their real estate.
JLL's new The Commercial Case for Making Buildings More
Sustainable report outlines three key factors that should be
prioritized in occupiers' and owners' decision-making to create a
more resilient and sustainable built environment.
Rising demand for sustainable buildings
In many global
markets, rising corporate demand for buildings with sustainability
credentials will have an impact on office market dynamics. Across
20 major office markets, including New
York, Paris and
Singapore, only 34% of future demand for low-carbon workspace
will be met in the next several years. In other words, for every 3
square meters of demand, only 1 square meter is in the current
pipeline.
The way occupiers think of sustainable buildings is also
changing. Historically, green certifications have been the primary
mark of sustainable buildings and tenants have been willing to pay
the price. Transaction evidence from 2023 shows healthy rental
premiums are still being achieved for certified buildings across a
range of global office markets – but the industry is shifting.
Tenants will increasingly seek environmental performance
indicators, such as energy intensity and electrification, on top of
green credentials. JLL is already seeing evidence of this in
advanced European markets, like London and Paris, where low-carbon prime office spaces
are reaching historic rental highs this year, even with an overall
slowdown in the sector.
"Despite the current headwinds from today's global economic
environment, the business case for making investment into
decarbonizing and resilience across real estate portfolios is
getting even stronger," says Guy
Grainger, Global Head of Sustainability Services and ESG.
"Taking action now will minimize the business cost of ever more
frequent climate events and maximize the commercial benefit from
the incredibly low supply of net zero carbon buildings in the
world."
More restrictive regulations
Although market forces
driving investors and occupiers are moving faster than regulations
right now, new legislation is on the horizon at an international,
national and most stringently at a city level. Policies from 16
global cities covering carbon, energy, buildings circularity,
biodiversity and resilience show a wide spectrum of commitment and
action. For instance, 'Climate Progressive' cities such as
New York, Paris and Amsterdam are rolling out an array of policy
instructions covering new and existing commercial and real estate.
New York has introduced several
pioneering local laws, while Paris
is taking the lead in considering embodied carbon and Singapore has set out a holistic approach to
greening its buildings.
Mounting costs from physical climate risks
The damage
caused by increasingly frequent and intense weather events is a
mounting concern for real estate. Part of building a strong
business case will involve understanding the risks of disruption to
business operations and potential damage to buildings. One of the
biggest challenges in assessing climate risk is the wide range of
approaches and the lack of consensus on standardization. Some
providers are thinking about value at risk in terms of insured
value, others are looking at the change in asset value or
replacement cost.
On Dec. 5, 2023, at 10am CT/11am
ET/4pm GMT, JLL will host a
webinar as part of COP28 to discuss
findings from the report with an external panel of experts from
ULI, Hines and Standard Chartered.
To register, click the link here.
About JLL
For over 200 years, JLL (NYSE: JLL), a
leading global commercial real estate and investment management
company, has helped clients buy, build, occupy, manage and invest
in a variety of commercial, industrial, hotel, residential and
retail properties. A Fortune 500® company with annual revenue
of $20.9 billion and operations in
over 80 countries around the world, our more than 105,000 employees
bring the power of a global platform combined with local expertise.
Driven by our purpose to shape the future of real estate for a
better world, we help our clients, people and communities SEE A
BRIGHTER WAYSM. JLL is the brand name, and a registered
trademark, of Jones Lang LaSalle Incorporated. For further
information, visit jll.com.
Contact: Allison Heraty
Phone: +1 312 228 3128
Email: allison.heraty@jll.com
View original content to download
multimedia:https://www.prnewswire.com/news-releases/demand-for-sustainable-buildings-and-tightening-regulations-drive-business-case-for-investment-301999392.html
SOURCE JLL-IR