Article | Adaptive Spaces
How are occupiers aligning their real estate portfolio with corporate sustainability goals?
October 2, 2024 5 Minute Read
CBRE’s 2024 European Office Occupier Sentiment Survey highlights a shift among occupiers towards further portfolio consolidation and relocation to better quality space. Lease expirations present an opportunity for occupiers to further align their real estate portfolio with their corporate strategies, whether downsizing or expanding office space. Over half of occupiers (52%) are relocating some functions to better quality space (up from 45% last year) driven by factors beyond cost:
- Desire to improve user experience in a smaller volume of space.
- Need to offer better amenities and services to employees.
- Alignment with corporate sustainability goals.
Corporate sustainability goals are crucial drivers – the majority of companies surveyed (83%) have publicly stated net zero pledges, and most have a timeframe attached to this. Although a commitment to decarbonisation is an important first step, the success of this pledge depends on having a well-defined strategic roadmap and budget, as well as the access to suitable real estate.
Other drivers reinforce this need for a robust transition plan to achieve climate goals, such as the EU’s Corporate Sustainability Reporting Directive (CSRD) and the recently passed Corporate Sustainability Due Diligence Directive (CS3D), which will require companies in scope to publicly disclose their climate transition plans and to implement them to the best of their ability.
Access to suitable real estate can be a key determinant. As net zero goals draw closer, occupiers are focusing heavily on real estate with sustainability features, as they see them as necessary to meet those targets (See Figure 1). However, as indicated in CBRE’s Global ESG Survey, there is a discrepancy in priorities, sustainability goals, and timeframes between Continental European occupiers, landlords, and investors. This could result in an inadequate supply of net zero-aligned real estate before the end of the decade. This would ultimately hamper occupiers’ ability to deliver on their commitments in markets where they cannot find suitable real estate and may leave certain investors with obsolescence issues earlier than first anticipated.
Figure 1: Building features favoured by occupiers
One step ahead
Real estate occupiers are often closer to achieving their targets than investors and landlords, as lease terms are generally shorter than the average holding period for investors. With net zero target dates approaching, many occupiers are focusing on practical solutions to decarbonise their portfolios.
Most occupiers who participated in our 2024 survey cite sustainability building features (both environmental and social) as having an impact on their real estate decisions. More than half of occupiers say that they would:
- Exit or reject a building, or
- Seek a discount in case the building does not have a green building certificate, EV charging, or facilities that support cycling or walking (See Figure 2).
Company strategy is also aligning with increased understanding of physical climate risk, with over 40% of companies saying they are making location decisions based on a location’s vulnerability to climate change and/or its shift toward a low-carbon climate friendly future.
Figure 2: Impact of specific sustainability features on building decisions
Considerations for landlords and investors
Respondents to our 2024 European Investor Intentions Survey are willing to pay a premium for buildings that already have on-site renewable energy generation and/or smart technology that adjusts building operations to reduce environmental impact. This is being supported by their expectations of occupier preference and rental premium for assets that meet sustainability standards.
The relationship between investors, landlords, and occupiers is therefore critical for achieving shared sustainability goals for buildings. Green Lease clauses can help facilitate this collaboration, improve building performance, and manage exposure to sustainability risks for all parties.
Figure 3: Preferred features in green leases
The priorities of occupiers in green leases are a direct response to the external pressures faced by organisations today. These include the sharing of energy, water, and waste data between parties, as well as the imperative for landlords to disclose their carbon footprint. The EU’s CSRD transparency requirements compel occupiers to increasingly gather, manage, and report on impacts outside of their immediate control, including landlord data on the performance of upstream leased assets, which often fall under Scope 3 emissions for many companies.
Sustainability is playing a major role in occupiers’ priorities as net zero deadlines draw closer. Delivering on these goals will require practical improvements in data quality, process, prioritisation of actions and – maybe most importantly – collaboration with landlords.
For the full analysis, explore our 2024 European Office Occupier Sentiment Survey.
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CBRE's 2024 European Office Occupier Sentiment Survey canvassed the views of over 120 companies to understand how they are managing current office utilisation, ...
Contacts
Dragana Marina
Head of Research and Data Intelligence, Denmark & Sustainability Research Lead, Continental Europe
Richard Holberton
Head of Office Occupier Research, Europe
