The sustainable asset advantage: unlocking value for a green future

The real estate industry is undergoing a significant shift towards sustainable practices. This transformation, driven by a growing awareness of environmental responsibility, holds immense benefits for building owners and occupiers. Not only do these practices enhance asset performance and long-term value, but they also deliver favorable financial outcomes. In this article, we will explore how sustainable solutions positively impact the bottom line and the environment, providing compelling reasons for the construction industry to embrace green building practices.

Lowering operating costs: Incorporating sustainable designs and features into real estate developments offers numerous financial benefits. Energy-efficient HVAC systems, green roofs, rainwater harvesting systems, and advanced insulation materials significantly reduce energy consumption and utility costs. Real-time monitoring technology enables proactive adjustments, leading to considerable savings. The World Green Building Council’s report, estimates reductions in energy use ranging from 25% to 30% in green buildings compared to conventional code-compliant structures. While the initial implementation costs may be perceived as high, the long-term savings often offset the investment within three to five years. Case in point: the Empire State Building’s retrofit reduced energy consumption by over 40%, resulting in annual energy savings of $4.4 million.

Occupant health and well-being: Sustainable buildings go beyond financial gains, promote the well-being and productivity of occupants.. Factors like air quality, natural lighting, and green spaces create healthier indoor environments that improve productivity and overall satisfaction. Studies have shown a direct correlation between occupant health and sustainable design, leading to higher tenant retention rates. Additionally, companies seeking to create positive work environments are increasingly attracted to environmentally friendly buildings, aligning with their corporate strategy and values. For example, the Interface office in Paris, designed according to the WELL Building Standard, reported increased employee well-being of (43%) and productivity (38%).

Green premiums vs. brown discounts: Building owners who incorporate sustainable practices experience significant advantages in the market. Properties with green credentials generate more occupier demand and achieve greater rental premiums globally. JLL’s research shows average premiums of over 7% in North America,10% in Asia Pacific, and more than 11% in London. Conversely, properties lacking sustainable practices are experiencing a decline in value, leading to lower rental income and reduced sales prices, these are referred to as "brown discounts." According to a survey conducted by RICS almost 50% of respondents worldwide reported experiencing a brown discount, with significant impacts on the property's overall performance.

Retrofitting and adaptive reuse: Revitalising underperforming spaces through retrofitting and adaptive reuse presents unique opportunities for both building owners and the environment. These practices enable the transformation of dated, underutilized, and energy-inefficient spaces into high-performing structures that align with current market demands and sustainability goals. Retrofitting addresses energy efficiency, functionality, and aesthetics, often involving upgrades to building systems, insulation improvements, and the incorporation of modern energy management technologies. Adaptive reuse caters to the growing demand for repurposed spaces while delivering significant carbon emissions savings. Projects where we were directly engaged such as Heriot-Watt University Dubai's campus and Aldar's headquarters in Abu Dhabi have achieved carbon emissions savings ranging from 40% to 70% when compared to new builds.

Owner-occupier collaboration through green leasing: Green leasing, despite not being widely adopted yet, offers substantial financial and environmental benefits for both building owners and occupiers. By incorporating environmental considerations and sustainability principles into lease agreements, green leasing encourages collaboration between the two parties. It drives efforts to reduce the environmental impact of buildings while improving energy and water efficiency. Moreover, it provides a platform for knowledge-sharing and innovation, ensuring long-term benefits for both owners and occupants.

We are at the forefront of understanding global benchmarks and studies to demonstrate the tangible return on investment (ROI) for sustainable real estate to clients. With access to extensive market data and research, JLL employs a data-driven approach to showcase the financial benefits and long-term value of incorporating sustainability practices into real estate projects.

By leveraging our broad network and deep industry expertise, JLL provides clients with comprehensive analyses and tailored solutions that demonstrate the financial viability of sustainable initiatives. Global benchmarks and studies allow JLL to quantify the ROI of sustainable real estate, offering clients valuable insights into the potential economic gains associated with energy efficiency, green certifications, and sustainable building practices.

These benchmarks and studies not only highlight the financial advantages, such as lower operating costs, increased rental premiums, and improved market positioning, but they also showcase the positive impact on tenant satisfaction, employee productivity, and overall asset performance.

Through evidence-based strategies and a commitment to sustainability, JLL empowers clients with the knowledge and confidence to make informed decisions that align with their financial goals and environmental values. By emphasizing the compelling ROI of sustainable real estate, JLL encourages clients to embrace green building practices as a smart and profitable investment choice.