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JLL report quantifies value of sustainable offices

Study from real estate service provider, written before the coronavirus crisis, reveals appetite for sustainable offices is driven by occupier’s target-driven sustainability commitments.

The Impact of sustainability on value report, written by JLL before the coronavirus crisis, seeks to quantify the extent to which demand for sustainable offices in London is increasing. Focusing on spaces that have BREEAM ratings or EPC certificates, it examines their rental values and pace of leasing.  

The study found that sustainable buildings in central London have a rental premium of between 6% and 11%, with vacancies lower in buildings rated BREEAM Excellent/Outstanding than those rated Very Good after completion.

JLL found that the number of companies signing up to evidence-based targets, has doubled since December 2018 to a total of 126 firms. These companies occupy around 12 million square feet of space in the capital, a third of which will be subject to a lease in the next five years.

“As we emerge from the crisis, we fully expect companies to prioritise sustainability as part of their strategy for recovery”

JLL

This demand for sustainable office space is being driven by companies that have their own sustainability commitments, which will intensify demands on landlords and the real estate industry. The report cites JLL’s latest investor survey, which showed that two thirds of respondents would be increasing their allocation to more sustainable property.

The report urges occupiers, developers and investors have an opportunity to showcase their sustainability credentials via their real estate footprint, but highlights a clear gap between demand and supply of sustainable office space.

However, JLL acknowledges the impact of Covid-19 and the uncertainty it brings to the real estate sector and the current uncertainty and says the report should be read in context of the pre-coronavirus market.

Nevertheless, JLL believes sustainability will be a long-term priority for many businesses, with the pandemic bringing sustainability issues to the fore:

“As we emerge from the crisis, we fully expect companies to prioritise sustainability as part of their strategy for recovery. This includes accelerated action on transition to net zero and this report provides useful evidence to build a robust business case for investing in sustainability.”

Featured image: 80 Charlotte Street, courtesy of Derwant London.

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