Green premium is minimal in Asia Pacific, report suggests
Asia Pacific investors and occupiers are prepared to pay more for green buildings, but not much, CBRE research suggests.
The broker collated responses from a number of recent surveys into a new report titled: The Green Building Premium: Does It Exist?
The report says: “While the precise magnitude of this premium remains difficult to quantify, and its extent varies across different markets, CBRE data suggest that a small number of occupiers would be willing to pay slightly higher rents for space in a green building, while a sizable number of investors would be willing to pay a marginal premium to purchase a green building.”
While more and more Grade A office buildings are gaining sustainability certifications, they tend to be concentrated in a small number of markets. Only in Australia’s largest office markets, Tokyo, Osaka and Singapore, does more than half the Grade A office stock have green certification.
CBRE’s 2023 Asia Pacific Investor Intentions Survey found a split between 58% of respondents – mainly private equity real estate funds and real estate investment trusts (REITs) – continued to factor ESG into decision-making while 42% - mainly developers – planned to delay ESG measures in the belief that the payback for any investment would take too long under current market circumstances.
The more negative respondents included 15% who planned to delay ESG initiatives, 15% who were reconsidering their ESG policies in the light of an uncertain market and 12% who have no plans to adopt ESG measures in the medium term.
Asia Pacific occupiers were also lukewarm on ESG initiatives. A CBRE survey last year found that only 9% were willing to relocate to ESG-compliant buildings at a higher rent. However, they were also insistent on paying a lower rent for buildings without ESG certification. CBRE suggests this ‘brown discount’ is up to 5%.
CBRE research found the rental premium for green buildings to be greater in markets where are rarer. For example in Shenzhen, where only 22% of Grade A stock is green, the premium is 22%. In Hong Kong, with 48% green buildings, the premium is only 6%.
The Investor Intentions Survey found 70% of investors prepared to pay a premium for a green certified property. However, most of those were only prepared to pay a premium of less than 5%.