New research from global property expert JLL reveals a significant financial advantage for landlords who invest in sustainability, with Perth's premium green offices commanding substantially higher rents from tenants dedicated to net zero targets.
The Premium for Green Star Ratings
According to the study, Perth's relatively small pool of sustainable offices boasting a 5.5 star energy rating can achieve a 7 per cent higher rent compared to the rest of the commercial market. JLL director Ronak Bhimjiani highlighted that the national data paints an even more compelling picture for the most advanced buildings.
He noted that a fully electric office is even more lucrative for property owners, drawing a remarkable 23.4 per cent boost on rental prices across Australia. However, Perth's market is still developing in this area, with only two or three buildings, including the iconic Central Park, currently meeting the fully electric standard.
Perth's Retrofit Opportunity and Market Lag
JLL's WA managing director, Angelo Amara, explained that Perth's low supply of modern, sustainable office space has created a prime opportunity for landlords. Investing in retrofitting older buildings with sustainability features is becoming a strategically sound financial decision.
This incentive is strengthened by the fact that no new office stock of scale is expected to enter the Perth market within the next five years. Any new development would naturally add to the city's limited supply of high-grade, sustainable stock, making the upgrade of existing buildings a critical pathway to meeting tenant demand.
A JLL report titled 'The Race To Decarbonise Australian Office Markets' shows that Perth is severely lagging behind other major capital cities. Mr Amara attributed this to Perth having the second-oldest office stock in the country, after Adelaide. A staggering 36 per cent of the Perth CBD's office space is older than 40 years, and 76 per cent is older than 30 years.
Tenant Drivers: Beyond Operational Savings
The push for sustainable office space is not solely driven by the prospect of lower operating costs. Mr Amara emphasised that corporate image and global commitments are powerful motivators for businesses.
"Tenants are happy to front up and pay more to be in an asset that helps them to meet their global corporate commitments to net zero and to shareholders," he stated. This indicates a strong market trend where a company's environmental, social, and governance (ESG) credentials are directly influencing its real estate choices and willingness to invest in premium, sustainable properties.
