Eco-Friendly Buildings Pulling in 4.2% More Rent
Seattle is perhaps the best-performing market in this regard.
Certified, energy-efficient buildings are getting higher rents – by as much as 4.2% more — especially if they expect significantly lower operating costs, according to a new study from JLL.
The report said sentiment about these buildings is shifting and is now practically a requirement of tenants, the report said.
This is in response to corporations aiming to achieve net-zero targets within a given timetable.
In the U.S., for example, 77% of San Francisco’s Class A office stock is LEED-certified, compared to 49% in Phoenix and the green premiums associated with these certifications are 5% and 11%, respectively, JLL said.
“Occupiers face a distinct challenge,” according to the report. “The most popular certifications today are typically design and construction based, and buildings’ emissions and energy use are only one component of these certifications.”
JLL said tenants will increasingly seek environmental performance indicators, such as energy intensity and electrification, on top of green credentials.
This is what JLL is seeing in some European markets, such as London and Paris, where low-carbon prime office spaces are “reaching historic rental highs this year, even with an overall slowdown in the sector,” according to the report.
Across 20 major global office markets, only about one-third of future demand for low-carbon workspace will be met in the next several years. So, there’s a way to go.
Seattle is perhaps the best-performing market in this regard. It has experienced robust construction activity, high levels of building electrification, and an energy grid that is among the cleanest in the country.
Other large markets such as Chicago face a steeper challenge, given its limited energy-efficient building stock, a constrained development pipeline. and inadequate clean energy supply on the grid.