Supply and demand dynamics vary significantly between major cities depending on factors such as the main type of industry and corporate space requirements as well as property features of existing stock.

City spotlights

New York

New York is dominated by finance and professional services, sectors that tend be highly carbon conscious. Across the leased footprint of the top 100 occupiers, 72% is tied to a carbon commitment. Demand from these corporates, at an estimated 2.2 million square meters by 2030, is expected to be twice the current development pipeline of suitable space.

Paris

Paris is amongst the most climate progressive cities in Europe. Across their leased footprint, 80% of the top 100 corporate occupiers in Paris are signed up to carbon commitments, with 17% of those being SBTi, NZC committed. This amounts to roughly 1.5 million square meters of future occupational requirements by 2030, compared with just over 800,000 square meters of best-in-class sustainable office space. As such, future demand is likely to exceed supply by 54%.

Sydney

Sydney, too, is facing its own significant supply issues. In June 2023, the National Australian Built Environment Rating System (NABERS) formally introduced a Renewable Energy Indicator as a parameter in its rating scheme, with the focus on rewarding buildings transitioning to electrification and procurement of renewable energy for operations. As the proportion of all-electric buildings in Sydney remains low, the city will see a deficit of NZC ready stock. Demand will be five times larger than future supply of all-electric 100% renewable energy buildings in the next five years.

Regulation may not have an immediate effect, especially on existing buildings, but it is coming both directly with building performance standards and indirectly through corporate disclosure mandates.

At international and national levels, there have been significant developments in corporate disclosure requirements in the past 18 months, including the EU’s Corporate Sustainability Reporting Directive (CSRD), the U.S. Securities and Exchange Commission’s (SEC) Climate-Related Disclosure requirements and the International Sustainability Standards Board (ISSB). Beginning in 2024, the ISSB will take over monitoring for the TCFD.

Given that more than 60% of carbon emissions within urban areas typically comes from buildings, city governments are increasingly implementing policies and initiatives aimed at reducing carbon emissions, mitigate growing physical risks and building longer-term resilience to a changing climate. 

Analysis of the targets, actions, regulations and instruments across 16 cities covering carbon, energy, buildings, circularity, biodiversity and resilience, shows a wide spectrum of commitment and action, from the ‘Climate Progressive’ cities such as New York, Paris and Singapore, to those cities that are just ‘Starting Out’ on their route to decarbonization. 

‘Climate Progressive’ city governments are rolling out a vast array of ‘carrot and stick’ policy instruments covering new and existing real estate. For example, New York has introduced several pioneering local laws while Paris is taking a lead in considering embodied carbon, and Singapore has set out a holistic approach to greening its buildings.  

As decarbonizing operations and retrofitting buildings involves extended timescales, taking action sooner rather than waiting for new regulations to be announced will help companies stay ahead.

Taking steps to decarbonize

The real estate industry has the expertise and technology needed to create low-carbon buildings. Every real estate portfolio will take a slightly different route to cut emissions and build resilience, but the steps to decarbonize, as set out in WEF-JLL Green Building Principles, are clear.

By implementing the right measures in the right way at the right time, owners can minimize the impact of physical and transition risks on their buildings – most specifically on their value and the income they generate – while corporates can reduce the disruption to their spaces and business operations. Both can unlock opportunities by developing sustainable and inclusive spaces that are ready for what lies ahead.