The real estate industry finds itself at a crossroad. Market conditions are compelling owners and occupiers to prioritize cost-cutting opportunities wherever they may arise. At the same time, corporate commitments and regulatory pressures leave little to no room for building owners to look past the global call for reducing emissions. However, by undertaking comprehensive planning and taking decisive action, investing in decarbonization becomes a strategic economic opportunity. 

JLL has undertaken a unique analysis of energy and emissions performance data from 46,600 buildings in 14 global cities and across 11 sectors to uncover the dynamic landscape of operational emissions in the built environment – and highlight the economic opportunity that exists in improving building performance today. The data has been compiled and aggregated from local energy benchmarking and reporting requirements. Together, these buildings represent 5.9 billion square feet of commercial space (or 550 million square meters) and a total of 120,700 GWh of annual energy consumption, enough to power 11.5 million homes for a year. 

This study reveals that 65% of office and 75% of multifamily buildings face stranding risk by 2030 if action isn’t taken to improve building performance.¹

A common misconception is that newer buildings are significantly more energy efficient than older ones. While mandatory standards, building codes and labels have helped ensure some minimum level of efficiency across newly constructed product, few markets such as New York City and Amsterdam show significant improvements in EUI across newer buildings. 

Many jurisdictions are now ensuring new construction is all-electric. In 2019, Berkeley, California in the U.S. became the first municipality to require all new construction to be all-electric, and since then about 100 other cities have followed suit, including New York, San Francisco and Los Angeles. 

Utilizing electricity in lieu of onsite fossil fuels means Scope 1 building emissions have been dramatically reduced or eliminated which, as a building owner, is a clear lever to pull. To meet climate targets, corporate occupiers have increasingly sought Net Zero Carbon buildings but have discovered that in reality, there are few to none available. As an interim solution, they have sought buildings that are 100% electrified and taken it upon themselves to secure clean energy supplies through onsite and/or offsite procurement strategies. As a result, because of market demands and its ability to reduce utility bills, efficient electrification has the potential to significantly increase building value. 

As more regions deploy clean energy, it is becoming the most cost-effective choice of fuel. In fact, the latest solar panels generate the cheapest form of electricity in human history, according to the IEA. 

In Europe, renewables have become the cheapest source of electricity generation. Producing a kilowatt-hour of power from solar is now 10 times cheaper than by fossil fuel gas. Within the EU, electricity consumers are estimated to have saved EUR 100 billion during 2021-2023 as a direct result of newly installed solar PV and wind capacity, after fossil fuel prices spiked following Russia’s invasion of Ukraine. In 2023, the average wholesale price of electricity would have been 15% higher without these capacity additions.

Many markets in the U.S. are also benefiting from similar trends. In Texas, the scale of renewables from 2010 to 2022 decreased wholesale electricity costs in the state by US$31.5 billion. Seattle benefits from the state of Washington being a leader in clean energy generation for decades. Over 80% of its power is generated from carbon-free hydroelectricity – and Seattle energy consumers benefit from 45% cheaper electricity bills than those in New York City, where the state grid is 62% dirtier in terms of grid emissions. On average, the lowest emitting buildings in the study can be found in Los Angeles and Seattle – these are markets with more temperate climates and cleaner energy grids. Among fully electrified buildings, it is only in Seattle where their emissions concentrate on the low end.

BPS vary across jurisdictions in terms of the targeted measure (usually Carbon Intensity (CI) or EUI), the limits set and the penalty amount as they take local nuances like energy grid mix, climate and city-wide targets into account. Yet, because they all share net zero goals by 2050 or earlier, their limits provide a solid benchmark to understanding the performance gap of real estate today. Denver’s BPS for example targets EUI while New York City’s, Boston’s and Seattle’s sets limits on CI. If faced with these leading BPS, around 66% of buildings in our study would face fines by 2030, given current energy or emissions performance levels.