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.

A key consideration though is that green premiums are influenced by time as well as the adoption rate of the green technology or element in question. As described by LaSalle, the demonstrable value of sustainable attributes tends to be low at first due to limited awareness, but rises as demand grows and eventually declines as those features become standard and expected in core assets, leading to risk of a ‘brown discount’, or a decline in value due to a lack of such elements.

As a result, the premium for a specific building in a given market will fluctuate over time, swayed by various factors such as technology adoption, regulation and occupier requirements. For example, LED lighting, which became commercially available in the early 2000s, initially led to a premium for buildings that adopted the technology. As it became standard, however, the premium decreased until LEDs were no longer a differentiator. Green certifications have become the measure for sustainability in real estate, but as more buildings align with the requirements set out by these frameworks, premiums are set to follow a similar downward path – unless these certification frameworks successfully evolve to capture the next frontier in sustainability and real estate.

In fact, this downward shift may already be happening in some markets as green certifications are quickly becoming a standard feature of top-quality assets. JLL Research continuously monitors adoption rates of green certifications across prime office markets and their associated green premiums. For most office markets in our study, green certified buildings make up over 50% of the Class A stock. Our research reveals an inverse linear trend between the adoption of green certifications and the associated rental premium. In other words, where markets are more saturated with green certified buildings, the green premiums these buildings achieve tend to be lower. This indicates that, for building owners, green certifications are becoming more of a requirement and less of a differentiator for their core assets.