Retrofitting to net zero
Currently, none of the cities in Asia Pacific including Singapore and Melbourne, the two highest-ranked cities after Sydney, are equipped with an adequate supply of NZC-ready office spaces.
The same trend is playing out in other regions. Major U.S. markets face a similar supply deficit of 75%, or 57 million square feet, by 2030, JLL data shows.
“Demand for high-quality low-carbon workplaces will inevitably grow when lease expiries approach,” says Miglani. “Occupiers risk being stuck with limited options if they fail to plan ahead and reevaluate the sustainability credentials of their current premises.”
To address this issue, the region must accelerate the rate of retrofitting to meet future regulations and keep up with the growing demand.
“Redeveloping or upgrading assets to be NZC-ready will be the most efficient solution to bridge the supply-demand gap,” says Miglani.
“Investors and owners have to start with incremental upgrades now to gain a first-mover advantage, or risk a brown discount as climate-related regulations become more stringent,” she says.
The good news is that the retrofitting potential is substantial in Asia Pacific, with over half a billion square feet of Grade A office space in the region built before 2011, according to JLL.
The catalyst for a net-zero future
In some cities, governments have already been playing a crucial role in addressing the supply-demand gap for NZC-ready office spaces.
Some have implemented legislation while others have dished out incentives to bolster the pipeline of NZC-ready buildings through retrofitting initiatives.
In June this year, Australia formally incorporated an energy performance measure in its National Australian Built Environment Ratings System (NABERS) to reward electrification of buildings and the procurement of renewable energy for building operations.
Similarly, Singapore’s government last year provided subsidies to building owners to lower upfront capital costs for energy efficiency retrofits, depending on the level of energy standards attained.
In the absence of sufficient NZC-ready buildings, proactive government support will determine how quickly cities can achieve their net-zero built environment goals.
“Only a handful of office buildings in Asia Pacific matches the criteria of a zero-carbon building today,” says Miglani. “The involvement of governments, coupled with corporate demand and action, will fuel the momentum and ensure a steady pipeline of NZC-ready office stock in the future.”