Sustainability Legislation Impacting European Office Market

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Over 83% of real-estate professionals think sustainability is the highest priority strategic issue facing office real estate decision-makers over the next ten years according to a new report by Jones Lang LaSalle (JLL).

The report states that sustainability legislation is now causing irreversible changes to European office buildings as real estate industry adapts at different speeds.

However, the path to consistent sustainable real estate is moving at different speeds across Europe with new legislation driving the evolution of best practice in countries such as France, Germany and the United Kingdom, while economic constraints are impacting overall progress in other countries.

Bill Page, Director, EMEA Research of Jones Lang LaSalle tells World Property Channel, "From almost nowhere a decade ago, sustainability is now a key consideration for office real estate. Whilst environmental change, cost control and ethical business practices are all part of the equation, legislation is the real game-changer forcing European occupiers and investors to adapt their office buildings. Whilst the European Union requires all new buildings to be nearly zero energy by 2020, there is a growing divergence across different buildings and countries. This gap is widening and will increase over the next decade between those leading the way towards sustainable real estate and those falling behind."

Page concluded, "A clear example of enforced change is the 2011 Energy Act in the United Kingdom. From April 2018, landlords will be unable to let out residential or business premises below a minimum standard, which is widely expected to be an Energy Performance Certificate rating lower than 'E'. An estimated 63% of UK stock has a rating lower than 'E'. This will force rapid change to the majority of buildings over a relatively short timeframe."

"Sustainability was once seen as a soft issue on the periphery of business strategy but this has now changed. We now have case studies where sustainable changes to buildings have improved employee productivity. Owners and developers of office stock will need to take rapid action to protect the value of their buildings and prevent them from becoming obsolete. A sustainable building will quite quickly become a prerequisite for prime property. Consequently, we expect the pricing gap to widen between sustainable and non-sustainable assets over the next few years", says Benoît du Passage, Managing Director - France and Southern Europe, Jones Lang LaSalle.

Occupiers will also need to remain watchful of sustainability when evaluating their real estate requirements. Whilst older, less sustainable buildings may offer lower rental costs, any savings are likely to be offset by higher operational costs given the trend towards rising energy prices.

Benoît du Passage further commented, "Employers cannot neglect the increasing 'social' aspect of sustainable real estate. Over the next ten years we expect productivity, employee satisfaction and sustainability to become intrinsically linked. We expect business managers to place greater emphasis on the social value of sustainable real estate."

Practical sustainability tips by Jones Lang LaSalle include:

1.    Develop a risk management program
2.    Review your estate by "green" credentials
3.    Prioritize and rank potential sustainability improvements by value at stake
4.    Ensure you have the necessary skills and expertise to make changes
5.    Bring staff up to a required level of awareness and competence
6.    Consider taking advice on complex issues
7.    Revisit changes that may take place across the building lifecycle
8.    Take a long-term view
9.    Use green issues as a catalyst for change
10.    Communicate a clear strategy