Why green is still the new black

As we navigate the complex political rhetoric circling sustainability, it is easy to lose sight of the fundamental role of sustainable real estate in the economy – done well, it delivers value. According to the Confederation of British Industry, the net-zero economy grew by over 10% in 2024 (three times the average growth of the UK economy), generating £83bn in value and employing nearly one million people. Having spent the past 17 years working in sustainable real estate, I have always focused on the commercial business case. But it feels like it’s time to remind ourselves of why we invest so much energy into transforming the built environment. Ignore the politics and focus on the value we can gain from taking the right actions – and indeed the value at risk from taking no or limited action. Six fundamentals 1. Demand for sustainable buildings is rising. Larger occupiers still expect sustainable, inclusive space to attract and retain talent, to make the workplace somewhere employees want to be and to demonstrate their brand credentials. JLL research predicts that, across Europe, 54% of demand for low-carbon offices and 28% of demand for low-carbon industrial spaces will be unmet by 2030. We expect “brown” assets to become less attractive, or even obsolete, as investors and tenants increase their understanding of how sustainability informs decision making. In JLL’s latest UK investor survey, 24% of investors said sustainability has impacted asset value by 0 to -20 basis points, with 18% seeing a -80 to -100bps impact. 2. Sustainable assets offer commercial returns. Evidence demonstrates that sustainable buildings are driving value in several ways. With unmet occupier demand for sustainable spaces, green premiums are achievable for the right specification. For example, in London we have seen average rental premiums of +11.6% for green-certified office stock (with a higher energy performance certificate and BREEAM rating). There are also ways to create new sustainability-related income streams in existing assets. This is particularly the case for industrial, logistics and retail where clean energy can be produced onsite. This can generate additional revenue streams for owners. 3. Mounting costs from climate-related events. While the British weather might be unpredictable, we can predict that insurance costs for buildings will rise due to climate-related damage. In 2024, UK insurers paid out a record £585m for such damages. Though many companies have conducted climate risk assessments as part of their Task Force on Climate-related Financial Disclosures submissions, many have not translated these into action plans. Mitigating physical climate risks can reduce insurance premiums or even safeguard a building from being uninsurable, while increasing tenant appeal. JLL research found that 45% of leading occupiers will only seek buildings resilient to climate events. 4. High energy costs. Energy costs significantly drive the sustainable investment business case, particularly for industrial occupiers. We have seen up to a third of total occupancy costs spent on energy, so in the context of the UK’s volatile energy prices, sustainable, low-energy retrofits make sense. Light-to-medium retrofits can achieve 10-40% energy savings, with many interventions offering attractive payback periods. As ever, the question is who pays and who benefits (landlord or tenant), but increased collaboration through green leases should facilitate the conversation. 5. Security of supply. Critical infrastructure such as data centres, hospitals and laboratories require secure energy (and water) supply. There is an opportunity for asset owners and operators to develop a renewable component to that supply, for example onsite photovoltaics and battery storage. The UK government’s commitment to generating “clean power” by 2030 necessitates a £40bn annual investment into renewable infrastructure. For investors there are potential gains from being ready to capitalise on this plan. 6. Ramping up on carbon reporting and disclosures. Reporting and disclosures are often seen as not delivering immediate value. However, transparency remains a strong driver for international capital investment and ensures companies are held to account for their environmental and social impacts. The JLL GRETI index shows 84% of global real estate investment is in “highly transparent” markets. Ultimately, disclosures enhance our understanding of buildings and company activities, enabling focused investment efforts to maximise both commercial and sustainability returns. Long-term thinking The six fundamentals of this business case are grounded in the commercial value we can derive from sustainable real estate in the short to medium-term. However, we must not forget the long-term impacts of a changing climate, poor water quality and high air pollution – particularly in relation to our health and biodiversity loss. Companies who can balance mitigating these longer-term impacts alongside investing in sustainable real estate transformation will thrive in a market that has an increasingly sophisticated approach to valuing sustainability. Emma Hoskyn is UK head of sustainability at JLL