Offices with sustainability certification perform significantly better
Office buildings that meet Environmental, Social & Governance (ESG) standards through sustainability certification generate significantly higher rental income than non-certified properties
Amsterdam, December 1, 2021 - CBRE’s EMEA sustainability report reveals that certified offices generate higher rental income and have lower vacancy rates than office buildings that do not meet ESG standards. CBRE examined the relationship between sustainability certifications and the rents generated by office buildings in 15 European cities. The results show that, on average, rental income from certified office buildings was 21% higher compared to non-certified office buildings over a five-year period. Amsterdam is one of the outliers with an average 27% higher rent for certified buildings.
The rental premiums are largely driven by benefits associated with sustainable buildings, including lower operating costs, improved corporate reputation and increased comfort, well-being and productivity of the occupants. These benefits can be converted into rental value. The findings also point to the significant potential for a ‘brown discount’ for buildings with relatively weaker sustainability performance.
The study further shows that companies seem to be taking certifications into account to a greater extent. Despite the fact that location is still the most dominant factor, we see that more and more companies are giving sustainability aspects a higher priority in their decision-making. This trend is not only affecting the number of certified office buildings, but there now also seems to be clear international evidence that offices with sustainability certification operate better and, in the long run, should have a value-boosting effect.
Worldwide, BREEAM-NL is the most widely used instrument for the integral measurement and assessment of the sustainability of buildings and areas. It encompasses a variety of factors including health, energy, material flows and durability. BREEAM is by far the most widely used certificate in the Netherlands, which is why this study only looked at this certification.
“Sustainable and energy-efficient buildings yield so much more: a healthy environment and now also demonstrable financial returns. Investing in a sustainable building is simply a no-brainer”, according to Annemarie van Doorn, director of the Dutch Green Building Council, the civil society organisation that develops and manages the BREEAM quality mark in the Netherlands.
Certification leads to qualitative scarcity
CBRE expects that ESG will play an increasingly prominent role in business and that the demand for certified offices will increase as a result. The fact that one in five offices in Amsterdam is certified indicates that owners can still create a certain qualitative scarcity. For this reason, CBRE expects that the vacancy gap will increase further going forward and become more visible on the investment market. Tim Habraken, Director of Sustainability at CBRE Nederland: “The report shows that the benefits of sustainable buildings can be converted into market value. Over the past five years, the take-up of certified office buildings has increased from 24% of market share to 31% in the main European markets, confirming that leasing activities are increasingly linked to ESG agendas. With the growing commitment to decarbonisation, we expect the demand for sustainable buildings to continue to grow. However, it is important to note that buildings with robust environmental performance tend to be newer, state-of-the-art buildings, making it challenging to determine how much of the rental premium can be ascribed to sustainability certification. More research is needed throughout the sector to quantify the real value of certification.”