LEED-certified offices are more popular (and more expensive)

25 January 2024 Consultancy-me.com 2 min. read

Offices with higher LEED ratings are significantly more popular than their less sustainable counterparts – but also notably more expensive, according to research from CBRE.

For its analysis, the global real estate consulting firm assessed occupation rates and rental rates for LEED certified and non-certified commercial office buildings in Abu Dhabi and Dubai. The buildings analysed have a total gross leasable area of over 3 million square metres, or in other words, represent a considerable part of the supply in the two emirates.

In Abu Dhabi, occupancy of LEED-certified assets stands at 95.9%, compared to 89.5% for non-LEED-certified developments. In Dubai, the gap between the two types of buildings is also at around 6%.

Abu Dhabi, LEED-Certified Assets vs. Non-LEED-Certified Assets, Occupancy Rate, %

Source: CBRE Research

“Much like in many other key occupier markets around the world, occupier demand for sustainable offices in the UAE is increasing, with higher occupancy levels seen for the better performing green-accredited office assets,” said Taimur Khan, Head of Research MENA at CBRE.

“We are also seeing that certified developments are able to secure significant rental premiums compared to uncertified developments and we expect that this green premium will likely increase further going forward,” he continued.

In Abu Dhabi, the so-called average premium for LEED-certified assets is at around 33%, while in Dubai, that number is 34%.

Khan said that while the data to support the premium is still nascent, “we note a distinct relationship, where the higher the LEED rating for assets, the higher the premium they can achieve.”

Dubai, LEED-Certified Assets vs. Non-LEED-Certified Assets, Occupancy Rate, %

Source: CBRE Research

Introduced in 1998 in the United States, Leadership in Energy and Environmental Design (LEED) is one of many sustainable building certifications and grading schemes that are available on the market. “In the Middle East, LEED is the most commonly adopted certification scheme.”

The LEED program comprises of a number of accreditation schemes related to building design and construction, interior design and construction, building operations and maintenance, neighbourhood development, homes, and cities. Certification levels span the bands: Certified, Silver, Gold, and Platinum.

“Owing to the increasing importance of greening the real estate portfolio, we expect that LEED-rated stock will now be a market standard for new build. More so, in an effort to avoid obsolesce, we expect that many existing asset owners will enact capital expenditure and redevelopment programs to meet the requirements of their occupiers. In short, going forward, sustainable development practices and accredited buildings will be a requirement and not a choice.”