Rethinking the Office Sector in Asia Pacific

SINGAPORE

MUMBAI

Currently, while most Grade A offices in Singapore are currently certified green, a significant proportion (by GFA) of office buildings may see a downgrade or even lose their Green Mark ratings under the refreshed X 80% of buildings island-wide (by gross floor area [GFA]) are targeted to be green by 2030 X 80% of new buildings by GFA to be Super Low Energy (SLE) buildings from 2030 X 80% improvement in energy efficiency for best-in-class green buildings by 2030 THE SINGAPORE GOVERNMENT IS LEADING THE PUSH FOR SUSTAINABILITY IN THE BUILT ENVIRONMENT. SINGAPORE’S GREEN BUILDING MASTERPLAN AIMS TO DELIVER THREE KEY TARGETS OF “80-80-80 IN 2030”. THESE TARGETS ARE:

This has primarily been due to the development of new sub-markets across the city such as Bandra-Kurla Complex (BKC), which has attracted large financial institutions, pharmaceutical giants and regulatory agencies alike due to its high-quality stock, local amenity and high-quality transport infrastructure. change to allow for de-densification, high quality health and safety measures and minimum sustainability standards, existing stock will require repositioning. It is estimated that currently approximately 13% of stock, equivalent to almost 10 msf, will require some form of upgrade to meet these higher occupier standards. Furthermore, Mumbai’s central business district accommodates some of the city’s oldest stock with an average age of over 45 years, which in no small part explains why it has lost the mantle of commanding the city’s highest rents over a decade ago. Although the CBD accounts for only 2% of the city’s total stock (2 msf) it carries a high risk of obsolescence due to its age, congestion and generally lower levels of amenity. Notwithstanding, limited land availability and comparatively high capital values mean that redevelopment is often financially unviable. This is a conundrum that will need to be overcome to breathe new life into the city’s original office hub. MUMBAI’S OFFICE MARKET, BY GLOBAL STANDARDS, REMAINS RELATIVELY YOUTHFUL WITH PRIME STOCK AVERAGING LESS THAN 12 YEARS OF AGE. However, this does not mean the city is not without its challenges. As occupier requirements

BCA Green Mark 2021 scheme. Based on our assumptions, 73% of office buildings island-wide could potentially lose their ratings under the new scheme, with only 7% retaining their platinum ratings compared to 61% under the earlier rating system 3 . This presents a paradox that while Singapore is a global leader in sustainability credentials, new legislation continues to lift the bar higher meaning ongoing improvements are required. With more businesses and consumers embracing sustainability, the future office market landscape will be characterised by a flight to sustainability. The market will become two-tier, with green buildings achieving market rents while non-green buildings may see lower occupier demand, leading to below-market rents and occupancy rates. Between Q4 2020 and Q2 2022, the average occupancy rate and gross achievable rents of green office buildings were 2%-4% and 7%-10% higher than their non-green counterparts.

3 Banking on Green Office Buildings in Singapore

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