Efforts to decarbonise real estate are rising up the agenda as the effects of climate change become more visible. But while international alignment on sustainability standards in property can help to drive more consistent improvements, this is a complex task shaped by local realities.
The concept of ‘green’ in international office markets is fluid. It is defined not only by national legislation, but by city-level policy, incentives, tenant demand and investor expectations.
Local political sensitivities, technical challenges, climate risks and the nature of existing building stock mean that sustainability standards today can vary considerably from one city to another. While national regulation sets the baseline, local governments and market dynamics often lead the way in shaping best practice.
“Regulation sets the floor for sustainability in office markets, establishing minimum standards for new development and major refurbishments,” says Chris Cummings, founding director, Savills Earth.
But he emphasises that this is just the starting point. “Cities often go further, using building codes, incentives and policies to shape what green really means in a local context. Even within a single country, there can be significant differences between cities, reflecting local politics and climate goals.”
At the same time, national and supranational regulations are increasingly being scaled back in response to market challenges such as high construction costs, financing constraints and supply chain issues.
For example, negotiations over the EU’s Energy Performance of Buildings Directive (EPBD) have seen proposed standards eased to make sustainability improvements achievable for more of the market. Higher city-level standards may become more common as a result, as local governments seek to display leadership in sustainability.
Demand for green offices
Regulation and policy are only one aspect of environmental standards in the office sector. Standards are also driven by what tenants are willing to pay premiums for and what investors are therefore willing to fund.
Global business centres with concentrations of financial services, professional services, technology and life sciences businesses typically have the highest levels of demand for sustainable offices.
These businesses tend to prioritise ambitious net-zero targets and publicly report their sustainability commitments through frameworks such as the Science Based Targets initiative and the Global Reporting Initiative Standards.
Given that real estate is a major contributor to operational carbon emissions, these types of firms typically require high environmental standards across their office portfolios to meet both regulatory expectations and investor scrutiny.
Public net zero commitments reported via Global Reporting Initiative Standards, by sector
Source: Savills Research using Global Reporting Initiative Standards data. Top ten sectors reported
Locations with high office demand from the public sector also tend to have elevated sustainability expectations. Public sector bodies can be bound by climate targets and required to meet specific building performance standards by fixed deadlines.
For example, the Greater London Authority requires public buildings to meet strict energy efficiency standards aligned with the city’s net zero 2030 target. In Washington DC, all district government buildings must be net zero by 2032.
What sustainability standards mean for tenants and real estate investors
City-level differences in sustainability standards can present distinct challenges and opportunities for occupiers and investors.
Investors must account for differences in local policy, market expectations and available incentives in their strategies. Gaining a competitive edge often means exceeding national requirements as well as aligning with city-level expectations and long-term local sustainability plans. Nuanced due diligence is vital.
For tenants with global office portfolios, understanding these local dynamics is essential. It enables them to develop real estate strategies that deliver on their environmental, social and governance (ESG) commitments and help attract and retain talented employees.
It’s also important to understand how city-level market demand compares with stock availability. Singapore, for example, experiences strong tenant demand for net-zero or highly sustainable office space but has limited supply.
Berlin similarly faces shortages of premium green offices in its central business district, with intense competition among tenants for best-in-class buildings. Other cities offer deeper pools of sustainable office stock, such as Washington DC, London and Amsterdam.
Another challenge for cross-border tenants and investors is the lack of standardisation in energy labelling, which can vary both between and within countries. In Belgium, the same energy performance (measured in kWh/m²/year) would receive a ‘C’ rating in Flanders but a ‘D’ or ‘F’ in Brussels, owing to stricter rating thresholds in the Brussels-Capital Region.
Standards for primary energy consumption in ‘A’-rated offices across Europe can also vary significantly, from around 35 kWh/m²/year in the UK to approximately 160 kWh/m²/year in the Netherlands. While the revised EPBD aims to harmonise metrics, cross-border investors and tenants should prioritise actual energy data over label comparisons until full implementation.
EU energy label comparison, by country
Source: Savills Research using europa.eu
Local leadership and best practice in sustainable offices
Around the world, cities are emerging as leaders in specific areas of sustainability and setting examples of best practice.
Operational carbon
Operational carbon, or the emissions from a building’s energy use, is a key focus for sustainability policy linked to office space.
New York City’s Local Law 97 is an ambitious regulatory effort to address operational carbon in existing buildings. It sets tightening emissions caps on large properties and imposes substantial financial penalties on owners of older, carbon-intensive properties if they fail to comply.
The effects of the policy can already be seen. Even some of the city’s most iconic buildings have received retrofits, energy efficiency upgrades and electrification of heating systems. The Empire State Building retrofit is a global case study, demonstrating how significant energy savings and emissions reductions can be achieved in ageing office stock.
Embodied carbon
Embodied carbon accounts for the greenhouse gases released during a building’s construction. Regulating embodied carbon is inherently complex, but several cities have developed successful policies.
Nordic cities, including Oslo and Stockholm, are notable for establishing embodied carbon limits in building codes. This has encouraged innovation in materials and design, alongside strong support for low-carbon and recycled materials.
Both cities have introduced streamlined permitting processes, policy incentives and public procurement strategies that favour mass timber construction. They have also updated building codes to facilitate the construction of taller timber structures. Norway’s Mjøstårnet is the world’s tallest timber building.
Climate resilience
Climate risk adaptation and resilience are key pillars of long-term sustainability. Singapore is a global pioneer in urban climate resilience, with a national strategy addressing heat stress, flooding, and water security. Singapore’s main property sustainability certification is the Green Mark. It includes criteria on climate resilience and encourages passive cooling, flood barriers and water-efficient landscaping. The Marina Bay Financial Centre, for example, has flood protection features, rainwater harvesting and cooling strategies, setting a high bar for resilient office developments.
Amsterdam also integrates climate adaptation into office sustainability building standards. As part of its ‘sponge-city strategy’ to tackle flooding, all new office buildings must incorporate water-sensitive design features and capture and retain the first 60 mm of rainfall on-site during a rain event. By embedding these requirements into policy, the city is ensuring its offices – alongside its streets and rooftops – are part of an adaptation effort against its greatest climate risk.
While the goal of greener offices may be shared globally, the pathways to achieving it are not yet uniform. Innovative cities can act as standard-bearers for sustainability, developing models that serve as examples for their counterparts to follow. Tenants and investors who understand and adapt to these local variations can benefit from strong opportunities to future-proof their office portfolios – and assume leadership roles in climate action.
