JLL Q&A: Is US Real Estate Sector Ready to be Sustainable? (2024)

With the built environment accounting for 40% of global carbon emissions, there is increasing urgency for the real estate industry to step up its sustainability efforts.

New legislation is forcing businesses to disclose their sustainability work and outcomes, while extreme weather is adding to the pressure.

JLL, a leading professional services firm that specialises in real estate and investment management, is one of the companies that is putting sustainability at the centre of its work.

Its LinkedIn profile says: “JLL shapes the future of real estate for a better world by using the most advanced technology to create rewarding opportunities, amazing spaces and sustainable real estate solutions for our clients, our people and our communities.”

Monique Vutla, Head of Global Sustainability Product, JLL, spoke to Sustainability Magazine about the challenges – and the solutions.

JLL works to create sustainable workplaces

Can you provide an overview of commercial building performance standards in the US – are cities moving quickly enough with regulations?

The US has generally lagged its European peers in terms of actions to create more sustainable cities and real estate markets, but it is starting to catch up thanks to the Biden administration’s Inflation Reduction Act – one of the world’s most ambitious fiscal and industrial policies to global climate goals set in the Paris Agreement in 2015.

Several US cities are further closing the gap. With Local Law 97, New York now boasts the world’s most stringent building regulation for emissions. Boston’s Building Emissions Reduction and Disclosure Ordinance requires public disclosure of emissions and Washington DC’s Building Energy Performance Standards sets a threshold for energy performance in existing buildings. These cities are also taking the lead in mobilising their data, with data sharing between building owners, which is proving to be an excellent ally to progress.

How will the SEC climate impact disclosure rules for companies impact efforts by occupiers?

As the addition of new regulations is accelerating, including the SEC disclosure, sustainability data management – implementing common data platforms to enable frictionless collection and visibility to data, but also increased censoring and monitoring of energy-consuming equipment providing better and more complete data to drive insights and inform energy optimisation opportunities – will become the “new normal” for occupiers.

In addition, we expect a dramatic increase in energy optimisation and energy efficiency retrofit projects as occupiers direct efforts toward energy and resource efficiency.

Are other pressures pushing occupiers and business owners to step up regarding sustainability practices?

Regulations are a part of it. We see four main market forces that are driving occupiers to step up and take sustainability action:

• Growing expectations around sustainable buildings from stakeholders, employees, consumers and shareholders: These groups see corporations’ real estate footprint as a major contributor to emissions driving climate change and are putting pressure on them to take action
• Physical Climate Risk Exposure: Increasing temperatures, rising sea levels and extreme weather events are having a profound impact on building maintenance or “climate future proofing” costs and future valuation. Occupiers are increasingly including climate risk assessments when developing location strategies and the total cost of ownership
• Regulation and Compliance Risk: New requirements at multiple levels – local, city, state, national. Occupiers are increasing their support with the management of this shifting and increasing landscape to ensure compliance and mitigate risk
• Access to growth: Failure to show sustainability progress is creating financial risk. There are increasing debt, equity and insurance costs for occupiers as they look to access capital to grow.

Are you seeing an increase in action and do you expect to see more net-zero buildings?

Yes. For many owners and companies, achieving their decarbonisation goals won’t be possible with their existing footprint and operations. In fact, research from JLL shows that demand for high-quality, low-carbon workspace is set to outstrip supply by 75% across major U.S. markets by 2030.

This necessity to change is driving an acceleration in technological investments. Data will be imperative to creating any successful decarbonisation strategy, helping make informed decisions, identify attainable targets and assess progress.

Landlords and tenants will need to collaborate to form new partnerships, create new business models and identify co-investment approaches. And the real estate industry must rebalance its efforts from new construction to the retrofitting of existing buildings.

Buildings produce 40% of the world's carbon

Why is it so important that occupiers and companies step up?

With the built environment accounting for 40% of global emissions, owners and occupiers must do their part to tackle decarbonisation head-on. While there are environmental benefits, occupiers and companies have higher financial and operational incentives to consider.

Companies that don’t put mitigation measures in place stand to face higher costs and lower revenue. This includes disruption to operations, employee shortages, impacts on brand value, higher operating costs, value depreciation, access to better financing, more frequent and severe physical risk and rising capital expenditure.

What are the main challenges businesses and building owners face in meeting the requirements?

The four main challenges facing businesses in making sustainability progress include:

• Technical programme complexity is increasing:Complexity needs strategic management andongoing maintenance. A partner with deep expertise on the intersection of sustainability andreal estate value who can lead you through the journey is critical
• Visibility and consistency are increasingly difficultas programmes scale across locations andgeographies: A common platform (people, process, technology) enables consistency at scale
• The external landscape is rapidly evolving:Shifts interms of regulation, employeeexpectations and leadership/shareholder requirements mean corporations must constantlyevolvestrategies to ensure risk mitigation and value creation
• Progress takes culture change: To truly make progress on sustainability the whole enterprise needs to be on board. Companies must embed sustainable ways of working – driving engagement at all levels of the organisation andensuring integration across the built environment value chain to make progress.

To tackle their carbon footprints, are you seeing an increase in spend on technologies?

There is an increase in spending on technologies in general as it advances and innovates all parts of the business. Currently, we see spending increasing across three major areas:

• Investment in sustainability data management and scenario planning technology platforms: These help to drive aggregation, visibility, accuracy and strategic insights of critical sustainability data across a portfolio
• Investment in clean energy technology solutions such as solar, wind, microgrid and battery
• Investment in energy efficiency and electrification technologies to drive reductions in building energy usage.

Real estate sustainability

In which area of building performance management is there the most scope for sustainable change with technologies?

There is a huge role for technology to accelerate change in optimising building performance. The three key technologies are:

• Implementing high efficiency, well-coordinated building equipment and systems at the moment of construction or during maintenance programmes
• Implementing continuous commissioning/SMART building technologies to drive visibility to a complete picture of energy profiles and usage so that energy managers can provide immediate and proactive interventions to keep equipment running optimally
• An Asset Management platform that allows for a strong Lifecycle Asset Management programme.

How is AI changing the game?

One way AI is changing the game for sustainability is through its ability to fill data gaps and complete the story of decarbonisation.

Today, most companies operate with low-quality, incomplete data sets, making visibility to the current state and “what investments do I need to make to achieve my goals?” very difficult or even impossible.

To solve this issue, at JLL we have developed a real estate AI decarbonisation scenario planning technology.

Leveraging archetype-based and machine learning modelling, the technology can piece together and plug holes in that incomplete data set to give you a fuller picture of your emissions as well as predict the costs and benefits of different initiatives. This better, more complete data story becomes the critical backbone for sustainability strategies and investment decisions.

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