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Commercial case for sustainability is clear, says JLL

1st December 2023

Asset owners should be implementing clear decarbonization and resilience strategies, despite economic headwinds, JLL says.

The broker’s The commercial case for making buildings more sustainable report argues that climate risk, occupier and investor demand and regulation make sustainability investments “the smart decision for longer-term performance”.

The report highlights three reasons for making sustainability investments. Firstly, mounting costs from climate risks, including heatwaves, flooding, storms and droughts, are increasingly impacting urban areas, with significant implications for building owners.

Events such storms, wildfires, hurricanes, flooding, droughts and freezes, have cost $612 billion in the last five years in the US alone. Meanwhile, more than 350 cities have peak summer temperatures above 35°C. An estimated 970 cities will suffer such heatwaves by 2050.

Research by JLL and Munich Re shows that cities in Asia and the US sunbelt have the highest climate risk at present (see above). 

Secondly, sustainability measures are also supported by demand from occupiers and their employees. JLL points to a rental premium for green certified office stock of 11.6% in London, 9.9% across Asia and 7.1% in North America.

JLL also points to a global undersupply of green buildings, with an estimated 75% of demand for such properties unmet in the US, for example. In Europe and Asia, less than half of demand for green office space is met with supply.

Finally, asset owners are at risk of difficulties with financing, regulation and insurance if their buildings fail to meet appropriate standards. Both Europe and the US have released major corporate climate disclosure regulations in the past 18 months and the regulatory burden is set to increase.

An increasing weight of regulation is also coming at city level, with cities such as New York and London introducing their own measures to reduce emissions from the built environment. 

The JLL report suggests a number of measures, including energy-efficiency retrofitting, adapting building design and on-site clean energy generation, to make portfolios more resilient. 

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