Share of green office leasing touches 16% in 2022-2023; Global Capability Centres account for 76% of overall leases
Hyderabad and Bengaluru take the lead in green office leasing, constituting 64% of the total green lease market, a JLL – CRE Matrix report said on January 18.
The share of green office leasing in India has touched 16 percent in 2022-2023 with global office occupiers, especially Global Capabilities Centres, and institutional landlords being at the forefront of sustainable practices. The number is expected to touch 20% in the next one year, a JLL – CRE Matrix report said on January 18.
It said that the two largest GCC markets of Hyderabad and Bengaluru lead the adoption of green leasing practices, accounting for 64% of the overall green leasing in India.
As many as 1,530 leases were examined between January 2018 to September 2023. The total area of these projects was over 225 million square feet.
The data collated showed that the share of green leasing has quadrupled during the 2022-2023 period compared to the pre-COVID years of 2018-2019. This translates to a staggering 132% increase in leased area, from 3.7 million square feet to an impressive 8.6 million square feet, the report said.
This surge serves as a testament to the joint efforts of asset owners and occupiers to promote responsible leasing practices in the industry. However, widespread adoption is still a long way, and this can be attributed to the lack of industry-wide guidance, transparency, legal complexities, and split incentives, it said.
Waste management, energy efficiency and data sharing key aspects of green leasing
Green leasing clauses mainly focus on waste management, energy efficiency and data sharing aspects, with waste management and recycling obligations finding their way into most green lease agreements and some standard lease agreements as well. Energy efficiency is an important instrument towards reducing a building’s carbon footprint and hence, multiple clauses are centred around it, it said.
“Sustainability has now firmly been incorporated into the boardroom agenda. Various strategies are being devised to reduce carbon emissions from the built environment, and green building certifications and green leases play a crucial role in this endeavor. The Indian market is making significant strides towards sustainability and the increase in green-certified office penetration from 39% in 2020 to 53% in 2023, is a clear indication of this progress," said Samantak Das, Chief Economist and Head of Research and REIS, India, JLL.
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However, environmental performance results will still be lackluster if the building is not operated efficiently. Given the important role of occupiers in ensuring operational efficiency, moving from ‘traditional leases’ to ‘collaboration based green leases’ that enable data sharing and active collaboration between building owners and occupiers, is the need of the hour, he said.
“The office segment saw the last two decades focus on green buildings. We believe this contributed to India reducing its GDP emission intensity by 33 percent between 2005 and 2019, achieving the target 11 years in advance. Next target is to reduce GDP emissions by 45% by 2030 and achieve net zero emissions by 2070. The realty sector will play a key role in this mission and The next two decades are going to see the focus move to Green Leasing," said Abhishek Kiran Gupta, CEO and Co-founder, CRE Matrix.
"Green leases, accounting for around 16% of overall leasing today, are bound to reach around 20% penetration within the next 1-2 years. As both parties, landlords, and occupiers realize the benefits of green leasing, we believe a significant rental arbitrage to the tune of 10-15% will soon be visible between green and non-green leases”, he added.