Sustainability attributes have long proved to be accretive to rents and capital value, but the most prized green building features are constantly changing. As markets shift to value building performance, what’s in store for today’s most popular certification frameworks?

• Green certifications are the go-to method for most stakeholders to assess a building's sustainability credentials. In many markets, they are becoming a standard feature of top-quality space.
• These frameworks play a key role in providing a holistic building assessment, but as priorities shift towards carbon reduction, it is crucial to understand what these certifications actually represent.
• In most markets, there is gap for a certification that can effectively validate and verify energy and emissions performance – and progress is underway to close this gap.

There are many different ways to demonstrate sustainability in commercial real estate, but the most common form has been through third-party building certifications schemes, like the U.S.-developed LEED and UK-led BREEAM. Yet, as the transition to net zero reshapes how we define high-quality assets, how must these leading certifications evolve?

This transition presents many challenges as well as opportunities not just to buildings and their owners, but to the certification frameworks we rely on to gauge sustainability. As decarbonization becomes the goal, occupiers, owners and investors alike are reassessing their sustainability-related priorities, and many are placing material carbon reduction measures at the top of the list. While the built environment accounts for around 40% of global emissions, 27% directly comes from building operations, creating an acute urgency to tackle a building’s energy and emissions performance. Yet, the most prevalent green building certifications across most markets today are typically focused on design and construction and do not necessarily reflect improved energy use or emissions during operation.

While the industry in most countries seeks ways to reconcile this performance gap, top-quality markets are also revealing a shift of their own. Multiple studies have looked to quantify the statistically significant price and/or rental premium for sustainable buildings, or the ‘green premium’, often measured by the presence of a green certification. Across global markets, JLL Research has found evidence of rental premiums ranging from 7.1% to 11.6% for green certified office assets. Although estimates across these studies vary, they reveal that sustainable attributes are generally always accretive to building rents and values, as assessed by LaSalle’s research, The Value of Green.

In the CRE industry, the pursuit of certifications has typically been landlord-led, but when it comes to company-wide carbon targets an increasing number of corporate occupiers are making ambitious – and public – commitments to net zero emissions. The new frontier of sustainability in real estate is now increasingly being pushed by tenants who are looking to ensure their operations in their selected sites are aligned with their own commitments.

When it comes to emissions, green building certifications are typically not an adequate measure as they are often design and construction based, and where operations are taken into account, energy use is just one component of the many other criteria they assess, e.g., water and waste. It is because of these nuances that, as the chart above demonstrates, there is no real trend and no downwards emissions slope as the level of certification increases across one of the most prevalent certification systems in our industry today.

The evolution of how we determine and prioritize sustainable attributes in the built environment will depend on our most pressing concerns. Building certifications will always have a role to play, but as tenants better understand the energy and emissions profile of buildings, third-party certifiers must be agile and proactive.

As part of a market-leading initiative, JLL recently partnered with the International Living Future Institute (ILFI) to develop a new certification program, announced just last month, for decarbonizing existing buildings without major capital projects. This is an evolution of ILFI’s Zero Carbon Certification introduced in 2018 – a performance-based certification that measures both embodied and operational carbon – but now geared towards existing buildings. This new initiative extends one of the industry’s most rigorous certification programs to apply to existing assets and, in doing so, accelerates credible decarbonization efforts in our sector.

Other major certification frameworks have already indicated that they have no intention of staying behind. The U.S. Green Building Council (USGBC) and the UK’s Building Research Establishment (BRE), the organizations behind LEED and BREEAM, have both stated plans to enhance their offerings in order to more accurately represent emissions performance:

• In September 2023, the USGBC introduced a draft version of its LEEDv5 for Operations and Maintenance rating system that focuses on setting existing buildings on a decarbonization path, while addressing equity, health, ecosystems and resilience. It closed the comment period in May 2024 and plans to open for registration in early 2025.

• Likewise, BRE is working to finalize its BREEAM V7 certification scheme which will focus on whole life carbon and net zero alignment. This scheme will apply for new construction, in-use, refurbishment and fit-out schemes and is set to be released later in 2024.

While Australia-led NABERS is already ahead of the curve in targeting operational carbon in commercial buildings, it is also making strides to release an Embodied Carbon rating tool. This tool will enable new buildings and major refurbishments to measure, verify, and compare their embodied carbon footprint – the emissions associated with materials - with similar buildings. Embodied carbon has historically been a blind spot in the real estate industry but this action from NABERS is an example of the growing trend to address these emissions.

With the question of how to finance sustainable, low carbon buildings and retrofits remaining top of mind, BRE, the USGBC and the Green Building Council of Australia (GBCA) recently announced an industry-first alliance that will promote sustainable finance mechanisms for the built environment through the use of certification schemes. A critical component of this alliance will be to demonstrate how systems like BREEAM, LEED and the GBCA’s Green Star support ESG reporting and ensure compliance with multiple classification frameworks, such as the EU and UK green taxonomies, and how they can be used to put buildings on science-based decarbonization pathways. The alliance has the support of key partners including GRESB, the Climate Bonds Initiative (CBI) and the Carbon Risk Real Estate Monitor (CRREM), critical players that investors, banks and issuers rely on to confirm the sustainability credentials of their portfolios and debt instruments and to confirm net zero alignment. This initiative will enable these certification schemes to help drive the $35 trillion in investments needed by 2030 to meet global net zero transition goals.

There are many ways in which certifications are and will continue to be an important feature of sustainable real estate. This is especially true in markets lacking transparency where third-party certifiers become the sole means of effectively evaluating green building practices. Moreover, the realm of ESG encompasses a wide range of elements, from social issues to physical risk, and efforts to deal with them are often siloed. Building certifications can uniquely serve to deliver a holistic assessment of a building’s complete sustainability profile, tackling energy and emissions as well as circularity, health, equity, biodiversity and resilience.

In a world that needs radical transformation, certification frameworks must evolve, adapt, and anticipate change to ensure they're not just part of the solution but play a key role in unlocking sustainable real estate's full potential.