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22


The impact of sustainability on value


What does that mean for London real estate?


Eighteen of the companies signing up to net zero carbon have a presence in central London, up from 10 just six-months ago. Their occupation totals just over 1.5 million sq ft. If we add Microsoft into the mix as well, then this would equate to almost 1.75 million sq ft of demand for net zero carbon buildings. While still only a small proportion of the central London market, it is only the start and, even at this early stage, this still equates to an initial need to build space equivalent to another 22 Bishopsgate.


Companies signing up to SBTs based in central London number 126 - which is double the number at the end of 2018 and occupy just under 12 million sq ft. We estimate that circa 8 million sq ft of this space is subject to a lease event before 2030. This equates to only one building life cycle and these corporates will need to consider how real estate can help them achieve their commitments.


Almost three-quarters of these lease events will occur in office space that does not currently have an environmental rating. There is a real risk to this 5.7 million sq ft of space, as these companies consider whether their real estate marries up with their environmental commitments. Even those that are in a BREEAM rated building are in space that achieved a rating under older qualifications, that may not stand up to future scrutiny.


Nearly 4 million sq ft will be subject to a lease event in the next five years.


The property teams in these companies are actively thinking about the implications of their companies sustainable ambitions on CRE decisions that need to be taken in the near term. They are having to rapidly put together a plan for their estates and for the additional investment needed to deliver on this.


Clearly the urgency to build these offices in central London is only speeding up and the first developers to undertake the task will reap the rewards of high levels of demand and the intrinsic higher performance of their product.


Neil Prime, Head of Central London Markets and UK Agency JLL7


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