Singapore green offices command 4-9% rental premiums versus up to 28% in Hong Kong: JLL
Wong Pei Ting
GREEN premiums for Grade A offices are unmistakable across 11 large cities in Asia, including Singapore, according to new research from real estate consultancy JLL.
Tenants in Hong Kong were even willing to pay as much as 28 per cent above normal rates, its report published on Tuesday (Nov 29) revealed.
The study, however, pinned down that the premiums commanded in Singapore – 4 to 9 per cent – were on the lower end. JLL said this could be a result of demand and supply economics, since green-certified assets are widely available in the country.
As at end-September, nine in 10 of Singapore’s Grade A office stock were certified green, compared with 13 per cent in Osaka, 29 per cent in Hong Kong, 37 per cent in both Tokyo and Seoul, 39 per cent in Bangkok, 42 per cent in Indonesia, and 44 per cent in Mumbai.
Green-certified buildings commanded premiums ranging from 7 to 28 per cent in Hong Kong; 7 to 22 per cent in Seoul; 4 to 11 per cent in Bangkok; and 7 to 20 per cent in Mumbai.
The corresponding figures for Tokyo, Osaka and Jakarta are unavailable, as the data are still being analysed, JLL told The Business Times.
Meanwhile, the study found that premiums commanded in China cities were on the lower end as well, with Beijing’s lagging furthest behind at 2 to 7 per cent. About four in 10 Grade A offices in Beijing are green-certified.
In contrast, all Indian cities analysed, despite hosting similar levels of green stock, managed to achieve an upper premium range going into the double digits. JLL attributed this to the “vast presence of multinationals” in the Indian market with ambitious environmental, social and governance (ESG) targets, for whom occupancy of green-certified buildings is non-negotiable.
JLL derived at its findings using a hedonic pricing model, allowing it to determine the rental premium between two identical buildings, green and non-green-certified, when location, age and amenity factors are held constant.
Data from 3,089 Grade A office buildings in 14 Asian cities were analysed as part of the study, it stated.
The consultancy said it conducted the study to understand the value of greening buildings, pointing out that the “big unknown” had always been cost. The findings supported the theory that assets with green credentials generate more occupier demand, leading to rental premiums, it said.
JLL, nevertheless, said the green premiums are expected to go down over time, pointing out that green-certified buildings will command a rental premium for only as long as the supply of such assets is insufficient to meet the ambitious net-zero targets set by occupiers.
“There is currently a premium opportunity, but this will quickly become brown discounts on less sustainable buildings, once regulations kick in,” it said.
JLL also remarked that the higher range of premiums were achieved by buildings certified with the highest level of certification within regimes, such as Singapore’s Building and Construction Authority (BCA) Green Mark Platinum, and Leed Platinum.
Leed, short for Leadership in Energy and Environmental Design, is the most prevalent green building certification in Asia, JLL noted. Seven in 10 green certified Grade A office buildings hold Leed certification, with the highest concentration in India and China, it said.
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