How is the world of work changing? How are local markets adjusting to new environments? And with sustainability more relevant than ever, how are office occupiers adapting to increasing ESG standards and requirements?
Savills research team presented the findings on recent office trends and outlooks followed by a panel discussion on sustainability for offices.
Presenters and panellists:
- Kelcie Sellers, Associate, World Research
- Sarah Dreyer, Head of North America Research
- Eri Mitsostergiou, Director, World Research
- Hyon Rah, Director, North America ESG Consultancy
- Nick Iles, Senior Sustainability and Waste Consultant, UK Property Management
Global office trends
The theme of our Impacts research programme this year is ‘Reconnect’. Specifically, we ask the question, what is the role of real estate in helping people and business connect and thrive in today’s world. One of our key findings is that people are gradually reconnecting but they demand more flexibility, sustainability and wellness from their real estate. During our webinar we explored how this is achievable for offices.
Kelcie Sellers, World Research Associate presented our research findings, which show that in terms of sustainable offices (LEEDS and BREEAM and WELL certified) the highest concentration is in the US and Europe, with some hotspots in the gateway cities of China and India. Even in the top 20 markets by volume of green stock, only an average 28% of total office stock is green certified. This means that over 70% of existing stock will need to be retrofitted or repurposed in the coming years to meet strengthening environmental standards.
Additionally, major office occupiers face the challenge of bringing their employees back to the office, while at the same time inflation is pushing up their costs. Office utilisation levels, have recovered somewhat but they still average 60% across 18 global cities that we monitor. Kelcie said, ‘The office must prove its worth as a place that contributes to productivity and innovation. That means better and inclusive design, which supports health, safety and sustainability and focus on amenity rich buildings and neighbourhoods’.
Sarah Dreyer, Head of North America Research, presented the latest US data, which show that leasing demand has rebounded from pandemic lows, but still lags levels seen in the years preceding Covid and may be slowing. According to Sarah, ‘Occupiers remain focused on high-quality options that will attract and retain talent’.
Our panel discussed the factors that drive office ESG agendas globally. On the one hand existing and upcoming ESG regulations and compliance across the world is becoming more strict. On the other hand some organisations have already adopted their own net zero commitments and have strategies to achieve their targets under the pressure of public demand and employee expectations. This is linked to the war for talent as younger employees, are looking at companies’ ESG credentials when they choose employers that they want to associate themselves with.
Whilst in the past the ESG agenda was driven mainly by investors and landlords, currently our experts see opportunities for occupiers to lead the improvement of the operation of their building performance, through collaboration with landlords.
Nick Iles, Senior Sustainability and Waste Consultant in UK Property Management said: ‘There is a lot an occupier can do to reduce their energy use such as lighting, computer energy use and water usage, which are operational issues controllable by the occupier and which can lead to attractive cost saving elements.’ Hyon Rah Director, North America ESG Consultancy added: ‘Tenant driven ESG measures are tangible and can become a tool to engage with employees and stakeholders, boost morality, foster positive sense of community, especially in a time that we are trying to get employees back to the office and have a sense of community.’ Both agreed that an alignment of interest between occupier and landlord is important and can be achieved though mechanisms such as a green leases, which are becoming widely adopted globally.
Employee health and wellbeing were also highlighted as top priorities, especially in the context of motivating people to return to the office. Air quality, lighting, sense of place, access to views and amenities that you don’t have at home are important. Hyon mentioned that ‘These things do not necessarily cost more but it is a different way of thinking to make sure that you will get people back in the office in a collaborative space and get them all to work together again in a different setting.’
Nick commented on the cost implications of ESG strategies: ‘More efficient building uses less energy, generate less waste, uses less water; the cost associated with those utilities is lower. That is a direct financial driver to make the building as green as possible.’
A final key take-away from the discussion was that there is an alignment of interests amongst landlords, occupiers and users to have buildings that are as sustainable and as healthy as possible.