London’s ‘green’ offices are expensive. But they may help retain workers

LONDON – A fifth of the world’s largest companies have committed to achieving net-zero carbon emissions, according to an analysis by the Energy and Climate Intelligence Unit, and a large part of those emissions come from the workplace.

It is expected for high sustainable offices, which means prices as well. In fact, there is currently a 26% gap in sale prices between London buildings with sustainability ratings from organizations such as BREEAM and LEED and those without, according to data from analytics firm MSCI.

That is known as “green premium.” On the flip side, less environmentally friendly, usually older, buildings come with a “brown discount.”

It seems to leave company bosses and investors with a simple choice between low overheads and low emissions – but there is more to the story.

Joy Nazzari is a founding director in London. He wanted to expand his business, but his former warehouse office building was too small and not accessible for people with disabilities, so the team moved to “mission critical”.

“Cost is a tremendous barrier,” Nazzari told CNBC, adding that office size and improved green credentials will push rents up “at least 50%” from what the market has seen so far.

“When we look at these brown discount buildings, it’s hard not to look for buildings like ours that are cute old warehouses,” he said.

Even finding a sustainable place can be a challenge.

“It’s not like you stumble across these green buildings all over the place. They’re rare,” she said, thinking that less than a third of the buildings she’s seen would fit the bill.

That weakness has pushed prices higher. On top of that, there’s the company’s brand to think about.

“In light of the burning of this planet it may not be appropriate [but] Your office building is a huge reflection of your business brand. A lot of the new buildings are offices and companies and they may not be in the places they usually choose,” he said.

But Nazzari faced a lot of pressure to move, especially from his own employees.

“Our team is very young, and that generation lives very much on the earth that they inherited… They are very aware of the green agenda, and they are constantly raising it. ,” he said.

Despite rising costs, the majority of companies are willing to invest in green workspaces, according to the global JLL Future of Work Survey 2022. The study found that 74% of the companies surveyed, represented by 1,095 senior corporate real estate decisions. Manufacturers in 13 countries are “likely to pay a premium for green credentials,” with 56% planning to do so by 2025.

Employee satisfaction is a big motivator for companies to go green, especially as the UK faces its tightest labor market in decades.

The unemployment rate was 3.5% in October, the lowest since 1974, according to data from the Office for National Statistics. This then increased to 3.7% in December.

“We have a critical shortage of skills and labor that is hurting companies and holding back growth,” Jane Gratton, head of people policy at the British Chambers of Commerce, said in a press release in November.

Of course, businesses want to keep the staff they have.

“We all know that we are in an almost complete working environment and there is a real need to build an environment where our staff work is one that is attractive,” said Peter Crowther, junior vice president at the British Council for Offices. , told CNBC.

“New employees are more interested in the performance from an environmental perspective of the building their employer occupies,” he said.

Almost 80% of the organizations surveyed in the JLL report said that employees “will expect their workplace to have a positive impact on the environment” while 75% said it has a positive impact on society.

And the shift to hybrid work means that every day, employees are thinking about whether it’s worth coming into the office, according to the CEO of Edge, a sustainable real estate developer.

“We have seen many examples of low-quality offices, so people don’t want to come into the office anymore,” said Coen van Oostrom, adding that the lack of contact can lead to the deterioration of company culture.

“Is it really expensive if you have a large office building that you use one or two days a week. That’s a lot of rent you pay for limited face-to-face time,” said van Oostrom.

Sustainability can be put on the back burner as finances tighten, says BCO’s Crowther, but it’s becoming more of a priority as climate conditions rise.

“There’s less readiness to see sustainability put down the list of needs because I think people are more aware of the climate that it’s not something that’s going to go away. It depends on what happens in the economy,” Crowther said.

Business owner Nazzari agreed, even though it meant he could face increased costs.

“Do we all just batten down the hatches and focus on the essentials? It is a real risk for the green agenda. We all have an obligation to ensure that we maintain and improve our carbon efficiency through all this,” said Nazzari.