Concrete Analysis | Landlords must consider the sustainability of their property if they want to attract quality tenants, investors

No longer merely an environmental issue, sustainability has become an investment fundamental.

Human health, livelihoods, food and water security – not to mention economic growth – are all underpinned by the common goal of keeping global warming under 1.5 degrees. Hence, more investors are factoring in the environmental and social impact they can bring to the world through their investment decisions. Since investing in environmental, social, and corporate governance (ESG) initiatives also reduces operational expenditure and lowers risk in business, a better return-on-investment can also be expected.

Without downplaying the human toll, the United Nations Environment Programme clearly shows how climate risk can impact investments all the way from income (reduced rent yield and falling occupancy), to expenses such as higher insurance premiums and eventual exit price, flowing on to impact liquidity and even availability of finance.

As showed by supporting data, growing market demand for sustainability in the commercial property sector is a quantifiable trend. Underscoring the value of green, evidence suggests buildings with green certifications bring in a rent premium of 6 per cent, and a sales premium of 7.6 per cent.

Meanwhile, green leases – an agreement between the landlord and tenant that aims to ensure that the ongoing use and operation of the building minimises environmental impact – are growing in momentum. Globally, some 34 per cent of occupiers already have green lease clauses, while a further 40 per cent plan to sign them by 2025, according to JLL’s “Decarbonizing the Built Environment” report.