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Tenants Won’t Pay For Green Office

Olga Wong, SCMP – Feb 20, 2009

More than half of grade A office tenants are not willing to lease green space at higher rents despite the fact that such features save on work costs, a survey has found.

The survey also found 40 per cent of tenants would pay higher rents if the increase were not too much – not more than 20 per cent of the price of offices without green features such as power-efficient lighting and air conditioning, and more natural light.

Global real estate services firm Jones Lang LaSalle polled 20 major local developers and 80 grade A office tenants last summer. It was conducted to identify problems in promoting the city’s green buildings. No margin of error was provided in the survey.

Although occupiers understand that it is more costly for developers or landlords to build and operate green buildings, many of them are not prepared to pay more for these premises,” said Marcos Chan Kam-ping, Jone Lang LaSalle’s greater Pearl Delta area research chief.

The survey showed 40 per cent of tenants would not pay more to lease an office in a green building and 13 per cent added that they should pay lower rents.Mr Chan said the survey did not ask why tenants wanted to pay less for a green office.

If the rent on an office with green amenities is 20 per cent higher than that of an office without such features, the survey found that no tenant is willing to rent it. However, 40 per cent said they would if the rent was 10 per cent higher.

Eighty per cent of developers had no mission statement on sustainable properties although commercial buildings consume 66 per cent of the city’s electricity. Seventy per cent said the major hurdle in adopting green measures was the high initial capital cost and the length of time before any returns could be seen.

Mr Chan urged the government to use more incentives to encourage developers to design more green buildings. “In the US, green building plans enjoy a faster approval procedure. This benefits developers, especially when the property market is going up,” he said.

William Lai Hon-ming, the firm’s head of property management, said conducting an energy audit helped companies save on costs. “Few know that using a water-cooled air-conditioning system can save at least 20 per cent of energy costs and the capital cost can be recovered in five years,” he said.

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