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for W Singapore – Sentosa CoveResidential rents up in Singapore on pent-up demand, supply crunchThe rise of technology and the rise of sustainability are not disconnected – they are inextricably linked. As consciousness of the environmental impacts of our actions grows, so does the demand for sustainable features in all aspects of our lives.
Sustainability has become a crucial factor for real estate investors in Asia Pacific, according to a recent study by JLL. The firm’s research reveals that 40% of investors in the region are planning to only invest in buildings with energy-efficient features and access to renewable energy by 2028.
This shift towards sustainability is not just limited to intention, but it also reflects a move towards action among investors, says JLL. Instead of solely focusing on green certifications, investors are now putting a greater emphasis on the measurable performance of buildings, and incorporating it into their evaluation and pricing of real estate assets.
In fact, JLL’s survey found that 63% of investors have been influenced by sustainability considerations in their bid offers over the past year. Among these, 40% have increased their offers for sustainable properties, while 30% have reduced their bids or withdrawn from deals involving non-compliant assets.
According to Kamya Miglani, JLL’s Apac head of research for work dynamics, sustainability obsolescence has become a major concern for investors, with 44% of survey respondents expressing worries over assets losing value due to non-compliance or the inability to meet tenants’ sustainability demands. She attributes this to the increasing influence of building regulations and international reporting standards that are compelling investors to apply a “brown discount” to non-compliant properties. This regulatory influence is expected to intensify in the future as governments in the region tighten building codes and mandate climate disclosures.
In Singapore, we can see that this trend is already taking shape, with more regulations being introduced in line with the nation’s net-zero ambitions. One such policy is the Mandatory Energy Improvement Regime (MEI), which is set to commence this quarter. Under this regime, owners of energy-intensive buildings will be required to conduct an energy audit and implement measures to reduce energy consumption.
In light of this, Miglani believes that investors and owners will need to adopt a holistic, data-driven strategy that strikes a balance between necessary upgrades and practical operational considerations, while also prioritizing the tenant experience. According to her, those who successfully execute this strategy will not only comply with future rules, but they will also position their assets to outperform the market.
Moreover, JLL points out that such upgrades can offer attractive returns, with a simple retro-commissioning of building systems estimated to save over $40,000 annually. For more extensive retrofits that involve upgrades to chillers and building management systems, annual energy savings could potentially reach up to $500,000 for a single commercial building.
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As more corporates and investors place a greater emphasis on climate-resilient assets, Miglani believes that those who take proactive measures to future-proof their portfolios today will have a competitive edge and secure long-term value in the market.
Overall, the rise of technology and the rise of sustainability are closely intertwined, and they cannot be viewed in isolation from each other. As awareness of our environmental impact grows, so does the demand for sustainable features in all aspects of our lives. This is something that real estate investors in the Asia Pacific region need to take into account if they wish to remain relevant and competitive in the market.