Unlocking the ‘green premium’ with expert, data-driven valuation

With growing evidence of sustainability driving positive impacts on asset value and strong returns on investment, a global firm elected to bring its value-add commitment to strategic investments in office markets across several European cities. The end goal: To launch its brown-to-green fund and outperform the market.

How do you assess ESG value and risk across multiple submarkets?

The client's vision for its new brown-to-green investment fund required finding poorly performing assets across London, Paris and Berlin, then retrofitting and modernising them, with a particular focus on improving sustainability credentials. To achieve the ‘green premium’ in these cities, firm leadership turned to JLL for detailed data and insight to pinpoint where and how promoting ESG would drive returns.

But given the dynamic nature of each of these global cities, it would be extremely challenging to achieve that level of granular data across key submarkets within each one.

A collaborative, data-driven review process was key to reliable evaluation

Working as an integrated One JLL team, the ESG Value and Risk team joined forces with JLL Research and Sustainability Consulting—and together also drew input from capital markets experts in the local markets. We provided regulatory review, market sentiment tracking and asset decarbonisation pathway analysis, with value impact advice integrated at each stage.

Across 50 submarkets JLL analyzed specifics including grants and planning policy, district heat network availability, and the level of investment needed to provide a market-leading product. We reviewed supply and demand imbalances by examining the footprint of local occupiers with clear sustainability goals and the future development supply pipeline of net-zero buildings. On the market side, we integrated data on take-up, vacancy, prime rents, rental growth projections, capital values and prime yields.

Insight-fueled ESG investment fuels resilience and returns

JLL’s deep dive identified the four best submarkets in each city—with green premium returns of up to 300 basis points identified in some submarkets. Layered on top of this was forward-looking insight for achievable green premiums in each location, using advanced valuation methodologies.

By understanding which submarkets could provide the greatest return on investment, the client is helping prove that shrewd green investment can pay off in more ways than one.