Large multinational and FDI occupiers who view their real estate as a reflection of their brand & culture want office space that attracts the best talent, which aligns with this brand & culture. These firms want the best performing and sustainable property which highlights their green credentials, goals (often these firms have sustainability pledges and targets) and helps attract and retain quality staff. Landlords and developers of offices have reacted to this growth in demand and have adopted higher standards such as the LEED (Leadership in Energy and Environmental Design) rating system, a voluntary rating system created by US Green Building Council to certify sustainable buildings and neighbourhoods.
Awareness of the climate emergency is at an all-time high and Ireland’s ambitious Climate Act, which was signed into law in August 2021, is actively pushing to Net Zero emissions.
As the real estate sector is a significant contributor to global annual greenhouse gas (GHG) emissions (30%) and consumes around 40% of the world's energy, the climate action plan sets out a target of achieving 50,000 -55,000 commercial buildings with net zero energy by 2030. In the Irish office market, there had already been a considerable increase in development and demand of buildings with high Environmental, Social, and Governance (ESG) standards.
The LEED system has been adopted widely outside of the United States and according to USGBC there are more than 100 certified projects in Ireland, of which 60% achieved the certification in the past two years. Ireland has also seen an increase in the amount of ‘Nearly Zero Energy Buildings’ office buildings - buildings with a very low (if not zero) level of energy consumption. This means the total amount of energy used by the building on an annual basis is almost equal (if not equal) to the amount of renewable energy created on the site, or renewable energy sources elsewhere nearby.
These offices incorporate elements such as low-carbon in their design and construction, and aim for zero-carbon in their operation: air-tight, sealed up spaces; rain harvesting & recycling wastewater; cycling facilities and biodiversity features such as roof gardens, living walls and even beehives.
Based on the high demand from occupiers, the increased focus from landlords, the higher rents, and prices achievable along with greater emphasis from valuers and investors on sustainable offices, we expect the growth in green offices to continue.
Conor Egan, Associate
Recent significant office developments that highlight the increased construction of sustainable office buildings include:
76 Sir John Rogerson's Quay
Built in 2020, this office building consists of 92,600sq ft (8,602sq m) of sustainable office space with LEED Gold status and a BER A3, with space leased to international firms including Rabobank, Trinseo and Algrebris.
The Exo building
Currently under construction, The Exo building will not only be Dublin’s tallest office development, it will also be one of the most sustainable, having achieved both a LEED Platinum certificate and a NZEB (Nearly Zero Energy Building) rating.
The Tropical Fruit Warehouse
This Iput-developed building will deliver 80,000 sq ft of exceptional office space, blending original warehouse features with spectacular modern architecture and design that will achieve a LEED platinum rating while proving that buildings which include, indeed incorporate, historic elements can provide sustainable office space.
Navigation Square
A significant development in Cork City’s Albert Quay, Navigation Square provides four buildings of 360,000 sq ft with Gold LEED standards.
Landlords and developers have also given commitments to increase substantiality across their portfolio. IPUT has published its net zero pathway and is planning to cut carbon emissions from new developments and major refurbishment projects by 40 per cent under its plans to achieve net zero by 2030. Similarly, Hibernia REIT, Ireland’s largest listed commercial real estate investment trust, has announced its intention to become a net-zero-carbon and climate-resilient business also by 2030.
Sustainable buildings are also more valuable and attract higher rents. Recent research from the US shows that LEED-certified buildings have consistently achieved higher rents compared to their non-LEED counterparts, and LEED-certified assets held a 21.4% higher average market sales price per square foot over non-LEED buildings during the past three years. Also, research conducted in the London office market shows that office buildings with the highest sustainability scores can achieve a premium rent in excess of 12%.
Sustainability is also driving real estate valuations and valuers are placing greater emphasis on energy rating certificates. Buildings that are not sufficiently energy efficient are being marked down and may, in time, become so-called stranded assets that have been prematurely written down. We are also seeing significant demand from investors and international funds in ESG office assets, and investors who don’t wish to develop or refurbish real estate assets will focus on acquiring assets that already have some form of high sustainability rating - which will lead to increased demand and more than likely higher prices for green office buildings.
Based on the high demand from occupiers, the increased focus from landlords, the higher rents, and prices achievable along with greater emphasis from valuers and investors on sustainable offices, we expect the growth in green offices to continue, and we will see the best office spaces in Ireland offer the highest standard and credentials, eventually seeing the office sector help push Ireland towards its ambitious climate goals.
Conor Egan is Associate Director in Savills Office Agency
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