Office buildings that meet environmental, social & governance (ESG) standards command higher average rents regardless of the year they are built, according to a new European analysis from global real estate advisor CBRE.
The research reveals that office buildings, both new and existing, that are certified to meet high environmental standards command higher office rents compared with non-certified stock.
CBRE’s analysis covered 7,500 leases in buildings with sustainable certification and 37,000 leases in non-certified stock across 18 markets, making it one of the largest and most robust European studies ever performed, according to the firm.
Based on a simple comparison analysis, the average rent for buildings with sustainability certification - denoting a high degree of energy efficiency - is 13.3% higher than for non-certified buildings.
However, when the effects of building location, size, age and renovation history are taken into account, as CBRE’s model does, buildings with sustainability certification earn a 5.5% rental premium over their non-certified peers.
This finding, said CBRE, supports the retrofitting challenge outlined by the European Green Deal, which aims to make Europe climate neutral by 2050.
The firm found that sustainable buildings’ rental premium is driven by a reduction in negative environmental impact, lower operational and maintenance costs, greater appeal to tenants concerned with corporate reputation and sustainability targets and increased occupant comfort, well-being and productivity.
Government regulation, which is increasingly forcing occupiers to report on non-financial performance such as ESG metrics, is accelerating this trend.
The findings are consistent with other CBRE studies over a long period of time, which suggest an enduring benefit to rents from verifiable measures to reduce carbon emissions.
In the 18 markets analysed, the share of the certified sustainable office stock stands at 20% as of mid-2022, compared with 14% in 2019. Leasing activity is following suit, with occupiers increasingly signing leases for space at certified buildings.
Dragana Marina, sustainability research lead for Continental Europe at CBRE, commented: ‘For the CRE industry to scale up the sustainability agenda, the business case around sustainable buildings needs to be clear. Our analysis shows a significant correlation between sustainability certificates and buildings’ market value – so the economic incitement is there.’
