Demand is on the rise for real estate that helps organizations meet their net zero carbon (NZC) goals. But for now, there’s just not enough space, particularly in the office sector, to accommodate everyone.

In the U.S., the supply of low-carbon workspaces will be 57 million square feet short by 2030, while no cities in the Asia Pacific region have adequate supply. In Europe, low NZC building demand is outstripping supply by a factor of three to one. 

“The gap between supply and demand is only set to widen,” says Guy Grainger, Global Head of Sustainability Services and ESG at JLL. “It’s creating opportunities for forward-thinking developers and investors to consider retrofitting existing office buildings with the prospect of higher rents in the short-term and protecting value in the long-term.” 

Grainger points out the commercial case for sustainable buildings has never been stronger.

“Mounting costs from climate risk, increased tenant demand, tougher regulation and restrictive finance all point to investment in decarbonization as the smart long-term strategy” he says. 

Commercial real estate investment is in the early stages of a significant reallocation of capital.

“Depending on location, it’s fair to say that diversification will take different forms," says Sean Coghlan, Global Head of Capital Markets. “And even for those sectors which are currently out of favor, we still see a place for global, diversified portfolios.”

For new strategies, Coghlan says deployment will be a hurdle, given varied degrees of barriers to entry, competition and crowding-in strategies. “That really reinforces the need for investors to act with agility and have real-time market connectivity.”

As a clearer picture emerges, investors’ existing holdings will need to be assessed, he adds.