We hosted an interesting debate on ‘Decarbonization of the Built Environment in Asia Pacific’ with Simon Greenfield, Sustainable Solutions Lead, JLL Asia Pacific. It is an important topic as the built environment accounts for about 40% of global emissions and its decarbonization is crucial for meeting the Net Zero goals. Simon shared that while the demand for sustainable buildings is rising on account of increasingly stringent regulations and climate commitments by corporates, the supply of green building spaces is failing to keep up; the shortfall will rise to 70% by 2030. Only 1% of the existing stock of buildings is being retrofitted each year as against 3% needed to meet the growing demand.
Occupiers who seek sustainable office buildings expect the owners to:
- Reduce energy consumption per sqm of office space and reduce the energy intensity by 50-60%
- Replace fossil fuel used for heating with electricity; and
- Switch to renewable energy.
In return, they are willing to pay higher rent; as much as 10% in Asia-Pacific. In addition to meeting their climate goals, the occupiers benefit from 10%-40% reduction in energy costs. There is a flight to quality as many occupiers are no more willing to operate out of dirty buildings. JLL helped one of its clients analyze portfolio of 100 properties by categorizing them by their carbon footprint and the owners’ ability / willingness to invest in upgrading them. This resulted in targeted action, including shifting some offices to new locations.
Green buildings typically use LEDs for lighting and have smart building management systems to match cooling, heating and lighting with the occupancy profile. This may involve shutting down some parts of the office, or even entire floors on days when there is low occupancy. Replacing conventional fossil fuel based heating with heat pumps is another important strategy. Onsite generation of renewable energy through rooftop solar (or integration of solar film with the façade of the building), purchase of renewable electricity (or RECS, if it is not available), smart glass to keep heat out (or in), battery storage, onsite EV charging infrastructure, connectivity with public transport, water harvesting, and green spaces are the other elements. An upgrade of buildings may, therefore, require substantial investment, which has been hampered by the high cost of capital over the past few years. However, landlords who are unable or unwilling to invest run the risk of their buildings getting stranded because of their inability to meet minimum environmental standards or occupier expectations. Collaboration between owners, occupiers and even governments will be needed to meet the challenge of greening the stock of buildings to hit the climate goals.