The impending green divide in Asia

Green certifications are a step in the right direction, but they do not guarantee a reduction in carbon emissions. Just because buildings meet some of the most prized environmental building design standards, this does not mean they will meet emissions goals. Current green building standards are not enough to take the built environment to a NZC (net zero carbon) future. While some certification schemes evolve with time, there is a need for both owners and occupiers to focus on building performance data and metrics rather than just the certification grade.

Occupiers will soon start to realise that green-certified buildings are not the only answer to their portfolio decarbonisation. They will start demanding low-carbon workspaces which are energy-efficient and support lower emissions.

We expect a huge green deficit that will further widen as we move closer to 2030, a timeline many corporates have set, aligning with the Science Based Targets initiative (SBTi), for meeting their intermediate sustainability goals. Even for cities like Singapore and Sydney, currently at the top of our Sustainable Offices City Index, the next five years would see an undersupply of low-carbon workspaces.

Lease expiration will be a critical point for a firm to reevaluate the sustainability credentials of their premises, thus driving up the demand for sustainable assets. Occupiers without specific net zero carbon targets may still prioritise sustainability-focused leasing decisions as they align with their broader environmental and social goals.

Our analysis of the demand-supply gap for ESG-focused workspaces showcases that demand will outstrip supply in most gateway markets of Asia Pacific.

Figure 1: Supply-demand gap of ESG-focused office space (up to 2028)

Source: JLL Research - The impending green divide 2023

Occupiers with NZC targets, especially those with near-term or intermediate goals, face challenges as their leases come to term. With no availability of NZC stock (or fully electric assets - buildings which 100% use electricity for their energy needs), they risk being stuck with limited options as lease expiries approach. This will leave occupiers negotiating new lease terms for truly sustainable assets in a fiercely competitive environment.