This article is from the Australian Property Journal archive
OCCUPIER and investor demand for green or sustainable property continues to grow, but, along with the construction sector and built environment are not moving fast enough to help reach global net-zero targets.
The RICS World Built Environment Forum Sustainability Report, which collates sentiment from over 4,000 contributors, found around half of respondents believe that green/sustainable buildings achieve a rent and a price premium over comparable non-green/sustainable buildings.
More than one-third believe that the rent and price premium stands at up to 10%; around 15% judge it to be higher still. Despite economic distress caused by COVID-19, just 5% of respondents noted a fall in occupier demand for green/sustainable buildings, and for investors this was only 6%.
Over 30% of respondents suggest that, even if there is no rent or price premium, buildings not classed as green or sustainable are subject to a “brown discount”. Less than 20% believe there to be neither a rent or price premium nor brown discount.
The RICS sustainable building index – a measure of occupier and investor demand – returned a net balance of +52% across the Asia-Pacific, slightly lower than the global average of +55%.
The Asia Pacific is seeing a pickup for climate-adapted real estate, reflected in 55% of respondents reporting a rise in rent for greener buildings, the highest net balance across the globe.
Across Asia Pacific, the main driving force behind the ESG investment boom is the demand from clients, stakeholders and customers (42%), followed by the brand image and reputation (32%) Across the world, demand from clients, stakeholders and customers is driving change (42%).
Globally, around 45% report a modest pick-up in investor demand for green/sustainable buildings in the past year, and a further 16% a more significant increase in interest, with Europe leading the way. Around three-quarters of contributors note rising investor demand across the continent, with almost 45% seeing a modest increase.
Almost one-third of Europe-based respondents report more significant demand growth over the past year, which contrasts starkly with other regions. In the Middle East and Africa, Asia Pacific, and the Americas alike, the proportion of respondents reporting a significant rise in investor demand for green/sustainable buildings is only around 10%.
Construction sector lagging
While the construction sector is responsible for around 40% of carbon each year, 70% of respondents said there is no operational carbon measurement taking place in the lifecycle of their projects. More than half of the respondents say that they don’t measure embodied carbon and for those that do, less than 14% use it to select the materials they use in their project.
Two-thirds of respondents said the top priority for the construction sector to become more sustainable is through minimising waste. Around half of respondents see more resilient construction products, materials and components as a principal concern.
Despite 55% of respondents reporting an increase in demand for recycled and reusable materials in the past year, 43% have yet to see a change.
Around 18% of respondents did say that if there was a standardised approach for measuring their carbon, they would use it, with the greatest appetite (over 30%) seen in New Zealand, Singapore, and Philippines.
The Asia Pacific construction market’s top priority to become more sustainable is to minimise waste (59%) closely followed by the resilience of construction products, materials and components (57%).
“As countries strive to achieve net-zero, the rising awareness in how integral ESG goals are to our future is coming through in our survey, as more occupiers and investors look for buildings that contribute to reducing their carbon footprint,” Simon Rubinsohn, RICS chief economist said.
“Construction firms, who are at the forefront of dealing with some of the major consequences of climate change, still believe more can be done to achieve net-zero. It is clear from the feedback that respondents have a willingness to improve but currently only a third of respondents are measuring their operational carbon output.”
“As material prices rise across the globe, and building supplies become scarcer firms are looking for new solutions that will help make a measurable impact when it comes to tackling climate change.”