How sustainability-conscious tenants are assessing new space

For growing numbers of companies searching for new spaces to lease, sustainability is now a top consideration.

While traditional priorities such as location and talent continue to factor strongly, buildings that tick the boxes as low carbon, high quality spaces are increasingly sought after – even in a subdued office leasing market.

And tenants are often prepared to pay more to secure sustainable space. JLL research shows an average green premium of 7.1% across eight major cities in North America, 9.9% across nine cities in Asia Pacific and 11.6% in London.

“The buildings companies occupy are typically part of their scope 1 and scope 2 emissions, which means is essential for them to address this in their real estate strategies to help achieve their targets and comply with reporting legislation," says Kirsty Draper, Head of Sustainability, UK Agency at JLL. “Even though for many companies, their workplaces are just a small part of the overall carbon footprint, they’re also an important reflection of their sustainability commitments to the outside world."

Take Spanish bank BBVA. It is planning to relocate its New York headquarters as part of its commitment to power operations by renewable energy. Its new HQ at Two Manhattan West in Hudson Yards will source 100% of its electricity from the run-of-river hydropower. The building is also located near major transport hubs with amenities including outdoor terraces and a fitness center.

“Expectations around sustainable buildings are growing at a time when companies are also downsizing and opting for higher quality spaces,” says Jaime del Alamo, ESG Value & Risk Vice President at JLL.

“Together with an increasing number of incoming regulations, more companies signing up to stringent carbon goals such as the Science Based Targets initiative (SBTi), and higher pressure to decarbonize from shareholders, a building’s sustainability credentials will come under increasing scrutiny.”

So, which criteria are on the green list for today’s companies?

1. Certified as sustainable

Although many common certifications are based on how a building is designed and constructed rather than how it’s operated, they’re still a popular marker for sustainability-conscious companies in many markets.

The likes of LEED and BREEAM are starting to evolve to align more with emissions performance, more in keeping with the National Australian Built Environment Rating System (NABERS) but such moves take time. In the meantime, in leading markets such as the UK, tenants with ambitious carbon targets are increasingly looking to factors such as energy use intensity and electrification on top of green certifications.

2. Low Energy Use Intensity (EUI)

Sustainable companies need energy efficient buildings – and EUI is the key indicator of its energy efficiency performance. Alaina Ladner, Senior Vice President, Sustainability Practice Lead, West Region at JLL, says: “Arguably it’s the single best piece of information to assess the sustainability of a potential site, as low EUIs generally reflect good performance.”

3. Supporting sustainable commutes

Employee commuting emissions usually account for approximately 10-20% of total emissions for service sector companies. Easy access to public transport hubs is therefore one way to keep emissions low for companies based in urban areas. However, given the rapid uptake of electric vehicles around the world, EV charging infrastructure in workplace car parks or easy access to on street charging is a growing consideration for companies looking to support greener employee commutes.

4. Complying with local level regulations

Policy targeting emissions from commercial real estate is rolling out at pace – and many buildings will struggle to comply. Regulations around buildings’ emissions and energy use may vary between different cities, states or countries but buildings that fail to comply will face financial penalties – and much of the burden of these penalties may directly or indirectly land on tenants. Reputational damage could be a further cause for concern. Tenants searching for space need a solid understanding of these local laws and choose buildings that are aligned with incoming policies, or choose landlords who have clear plans to meet the requirements by the time they come into force.

5. Landlords prepared to collaborate

Even leasing today’s best-in-class sustainable buildings requires good working relationships with owners, whether around data sharing, maintenance or ongoing environmental and social initiatives. For buildings that require further work to remain compliant with future regulations and build resilience to growing climate risks, close collaboration between tenants and landlords is crucial, not just on communication but also on potentially sharing costs and benefits. On longer leases, for example, investments in sustainable building infrastructure made may lead to lower operational costs in the medium- to longer-term.

More tenants are formalizing expectations through green leases covering an ever-wider array of topics that identify shared sustainability goals and help to drive progress towards them.

6. Access to green space

Integrated sustainability strategies are focusing on employee health, wellbeing and productivity alongside decarbonization. Workplaces with easy access to green spaces, whether plant-filled rooftop terraces, private gardens or even close proximity to parks, can deliver a multitude of health, stress relief and productivity benefits simply by enabling employees to get regular doses of fresh air and natural daylight.

7. Amenities that support wellbeing

High quality amenities that help employees to relax and stay active are increasingly popular. A growing number of buildings have opted for WELL certification, which indicates that buildings are designed to offer healthy indoor environments for employees through factors including fitness and mental health. In practice, workplace fitness amenities such as gyms, yoga studios or even rooftop running tracks can support health and wellbeing commitments while facilities such as secure bike storage and changing rooms can encourage employees to cycle or run into work.

For more information about the changing demand / supply dynamics at play in real estate markets, check out our research on The green tipping point: Is 2024 the year when carbon commitments change lease markets at scale?