Mumbai, Delhi struggle to meet demand for net zero-carbon workspaces, says report
A new report by JLL says Mumbai and Delhi are expected to face a shortage of top-quality sustainable workplaces by 62 per cent and 44 per cent respectively
As corporate commitments to achieve net-zero carbon (NZC) targets continue gaining momentum, major Asian Pacific cities grapple with a growing demand-supply gap for net zero-carbon-ready workplaces. According to new research by the global real estate consulting firm JLL, this widening gap poses a significant challenge to achieving sustainability goals.
Driven by the need to align real estate strategies with sustainability objectives and reduce carbon footprint, corporations increasingly look beyond mere green certifications when choosing office spaces. Instead, they are now focusing on building-level sustainability metrics, including energy efficiency and green energy procurement. However, despite the enthusiasm surrounding NZC goals, JLL's research indicates a considerable gap between commitment and action.
Kamya Miglani, head of ESG Research, Asia Pacific at JLL, said, “Leasing office space in green-certified office buildings is becoming a non-negotiable for occupiers, but currently, there is very little correlation between these certifications and a building’s energy performance. Even buildings with platinum-grade green certifications may not be NZC-ready, partly because current regulations are not stringent enough to demand NZC-ready assets.”
JLL's Sustainable Offices City Index, which assesses 20 cities in the Asia Pacific region based on criteria such as green stock, physical risk to buildings, city competitiveness, and city administrations' proactiveness with NZC targets, highlights that even in the top-ranked city of Sydney, current green building standards fall short of achieving an NZC-built environment.
A NZC building is characterised as all-electric, highly rated, energy-efficient, and powered by renewable energy. Sydney will face an 84 per cent undersupply of NZC-ready office space by 2027.
Miglani added that the demand for high-quality low-carbon workplaces will inevitably grow as lease expiries approach. “Occupiers risk being stuck with limited options if they fail to plan ahead and re-evaluate the sustainability credentials of their current premises,” she said.
Other cities, including Hong Kong and Mumbai, are also expected to experience a supply deficit, with a projected 68 per cent and 62 per cent shortage of top-quality sustainable workplaces, respectively. Similarly, Singapore, Melbourne, and Delhi are forecasted to be 56 per cent, 43 per cent, and 44 per cent undersupplied, respectively.
According to JLL's analysis, the Asia Pacific region must expedite the rate of retrofitting to meet future regulations and the rising demand for sustainable workplaces. The research concludes that redeveloping or upgrading assets to be NZC-ready will be the most efficient solution to bridge the supply-demand gap. Investors and owners are encouraged to initiate incremental upgrades, including retrofitting, to gain a first-mover advantage.
Failing to do so could result in a “brown discount,” reducing rental income as climate-related regulations become more stringent. With over half a billion square feet of Grade A office space in the region constructed before 2011, the potential for retrofitting is substantial in the Asia Pacific.