Commentary

Premium rental for green buildings in Asia Pacific

Occupiers in Asia Pacific are willing to pay a premium rental for green-certified buildings.

November 16, 2021

The pandemic has acted as a wake-up call for environmental and social responsibility. Occupiers have responded by putting sustainability and employee well-being at the centre of their future real estate strategies. Most major corporates have come out with sustainability pledges. The move is mainly driven by investor pressure, companies’ desire to be seen as ethical and their expectation that employees would demand green and sustainable spaces in the future.

A JLL survey with 478 occupiers in Asia Pacific shows that 7 10 are willing to pay a rental premium to lease green buildings in the future. However, the current supply of green buildings is insufficient to meet occupiers’ ambitious net zero targets. Evidences from our survey indicate the growing demand for green-certified buildings to outstrip their supply. We found that occupiers in the region would like to get almost half of their portfolios accredited by 2025, if possible. Their aspiration is unlikely to be achievable considering there is not enough supply to meet this demand.

However, occupiers are willing to pay a rental premium for leasing green buildings. We found that half of the occupiers in green-certified buildings in Asia Pacific are currently paying a premium between 4-10%.

This imbalance of demand and supply is bound to force landlords to consider refurbishing and retrofitting their buildings to meet existing and future regulatory standards and the demands of their tenants. Investors, in turn, will prioritise future investments in green-certified assets to ensure adequate supply.