Where do APAC markets stand in their bid to achieve sustainable real estate?
Green Horizons: APAC’s Journey Towards Sustainable Real Estate
With the urgent need to fight climate change, the APAC real estate sector is shifting towards sustainability. Buildings cause over 60% of carbon emissions in cities. So, we must shift to green real estate. It’s not just good; it’s essential.
Current Landscape of Green-Certified Buildings
Recent research by JLL reveals that only 40% of Grade A office buildings in APAC hold green certifications. This limited supply is insufficient to meet the ambitious net-zero targets set by many corporations. Consequently, there’s a notable supply-demand gap, leading to rental premiums for green-certified spaces. For instance, in Singapore, where approximately 90% of Grade A offices are green-certified, rental premiums range between 4% and 9%. Conversely, in Hong Kong, with less than one-third of such stock certified, premiums can reach up to 28%.
Corporate Commitments Driving Demand
The push for sustainable real estate is largely driven by corporate occupiers. A JLL survey indicates that 87% of occupiers across Asia Pacific aim for 100% green-certified portfolios by 2030, a significant rise from the current 4%. This ambition is particularly pronounced in countries like India, Malaysia, and Thailand, where over 95% of occupiers have set such targets.
However, with the current development pipeline, there’s a projected shortfall: for every 5 square feet of demand, only 2 square feet of low-carbon space is expected to be available by 2028.
Regional Leaders and Laggards
Singapore stands out as a leader in green real estate within the region. A Knight Frank report highlights the city-state’s comprehensive green building certification schemes and ambitious plans for a low-carbon built environment. In contrast, other Southeast Asian cities have more ground to cover. Kuala Lumpur, for example, is the only other city from the region to feature in the top 20, ranking 19th.
Challenges and Opportunities
The transition to sustainable real estate in APAC is not without challenges. A significant barrier is the cost associated with green building certifications and the return on investment. A study found that 60% of respondents identified these financial factors as major obstacles.
Additionally, the availability of renewable energy sources is a concern. Currently, only 9% of energy needs are met by renewables, but 74% of occupiers expect this to rise to 50% by 2030. This transition necessitates collaboration between landlords and occupiers, especially in areas like renewable energy procurement and sustainable fit-outs.
The Road Ahead
The APAC real estate market is at a pivotal juncture. The growing demand for sustainable buildings is set to outpace supply, leading to increased competition among occupiers for premium green spaces. This scenario underscores the need for developers and investors to prioritise sustainability in their projects. As regulations tighten and environmental concerns become more pressing, the shift towards green real estate is not just a trend but a necessity for the future.
