Business Insights | Why the office market isn’t ready for net zero

Despite ambitious net zero targets from occupiers and investors, the Australian office market is falling short. A significant gap exists between sustainability aspirations and the reality of available office stock.

The net zero imperative

Across Australia, major occupiers are embedding net zero targets into their corporate strategies. These goals are no longer aspirational - they are operational. Real estate is a critical lever in achieving them, yet the supply of truly net zero-ready office buildings remains alarmingly limited.

“Significant progress will be required for the Sydney CBD to meet the growing demand for highly sustainable office space going forward,” explains CBRE’s NSW Office Research Lead, Thomas Biglands.

“While prime office stock in Sydney’s CBD has an average NABERS rating of 5.3 stars, the average rating for secondary office properties is only 4.5 stars and very few properties have fully electrified their energy usage.”

What is a net zero building and why aren’t we there yet?

A net zero building is one that operates with minimal greenhouse gas emissions (Indirect or Scope 3 not included). This typically requires:

• Full electrification: Replacing gas boilers with electric heat pumps
• No harmful refrigerants: Phasing out refrigerants with high global warming potential and low ozone depleting potential
• Renewable energy: Onsite generation, power purchase agreements, or certified green power procurement

However, refurbishing existing buildings to meet these standards is complex and time-consuming. Projects often span several years and face significant hurdles:

• Capital costs: Upfront investment remains the biggest barrier
• Tenant disruption: Vacant possession is sometimes required, which can be commercially challenging
• Design constraints: Older buildings may not easily accommodate new systems or layouts

Where demand is coming from

The push for net zero-ready buildings is being driven by:

• Occupiers: Especially multinationals with global ESG mandates
• Investors: Seeking future-proofed assets and alignment with green finance frameworks
• Industry standards: Market leaders are setting the pace, creating a “green premium” and reputational advantage

Australia’s largest occupiers are setting the bar

A growing number of Australia’s largest occupiers, such as the Federal Government, have published detailed sustainability roadmaps. These include requirements for:

• NABERS Energy ratings of 5.5 stars or higher
• Fully electrified buildings
• Green leases with embedded decarbonisation clauses
• Transparent emissions reporting

Green lease clauses are becoming the norm

Net zero is no longer just a design brief - it’s a legal obligation that needs to become operational. Increasingly, lease agreements include clauses that:

• Require landlords to disclose energy performance
• Commit both parties to emissions reductions
• Enable data sharing for ESG reporting
• Commits to refurbishment works that prepare the building for a net zero future, eg: electrification plan

Not being ready is okay, but you need a plan

Not every building can be net zero ready today. But what matters is having a credible, time-bound decarbonisation strategy. Investors and occupiers are willing to work with landlords who demonstrate a clear pathway to compliance.

We can help close the gap

Where will sustainability-focused occupiers go if the market doesn’t evolve? That’s the question facing landlords today. CBRE’s integrated teams - spanning sustainability advisory, project management, leasing, and capital markets - are helping clients future-proof their assets and unlock value.

The demand is real. The opportunity is now to close the gap. From cost effective strategies like net zero focused capex planning, or the installation of solar and EV chargers, CBRE can assist.