The past four years have fundamentally reshaped real estate markets, economies and cities worldwide. Commercial real estate activity has slowed and many core business centers face record-high office vacancy amid the rise of hybrid working. Today, rightsizing and ‘flight to quality’ are driving leasing decisions. At the same time, the concept of 'flight to quality' is evolving to encompass energy performance and sustainability credentials as increasingly discerning occupiers seek spaces that align with their carbon commitments – and reduce operational spend.

More companies are rapidly committing to carbon reduction goals, many through the Science Based Targets initiative (SBTi) which has over 7,600 corporate signatories. Over 80% of signatories have joined in the past two years alone. As the buildings they occupy typically fall under their scope 1 and scope 2 emissions, these commitments have direct implications for how businesses operate and lease spaces. Moreover, aligning offices with carbon commitments clearly demonstrates environmental stewardship, allowing corporates to meet employees’ rising expectations.

Supply of low carbon offices will struggle to keep pace

Demand for sustainable, low carbon space is growing; however, our research shows that, without increased levels of retrofitting, supply will struggle to keep pace. Across top global office occupiers, an overwhelming share of future requirements¹ for space will be tied to carbon commitments. In 21 cities globally, 30% of projected demand for low carbon space will not be met by 2025, leading to a potential gap exceeding 70% by 2030, given the current quality of existing stock and the development pipeline.

Energy intensity

End-target for offices:

• 70-80 kWh per sqm or on pathway to meeting this target (~20-25kBtu per sqft)

All properties: reduce Energy Use Intensity (EUI) by 50-60% below current building averages

Electrification

100% electrified buildings or have plans to remove onsite fossil fuel systems in place.

Energy

100% clean electricity or have plans to source 100% clean electricity