Green Office Leases

Green Office Leases To Rise In Hong Kong

HONG KONG – With sustainability becoming increasingly crucial among companies, Deloitte thinks that eco-friendly office rentals are expected to become more prevalent in the Chinese territory, reported the South China Morning Post (SCMP) on Sunday (24 April).

“We believe the trend of green lease adoption will come to Hong Kong in the near future” with the rising importance of environmental, social and governance (ESG) factors in the property sector, said Philip Law, Real Estate Industry Leader at Deloitte.

Notably, a green lease is a deal between a tenant and a landlord to enhance the environmental performance of a property, by slashing water and power consumption and reduction of waste for example.

In Hong Kong, commercial properties account for roughly 90 percent of electricity consumption, and about two-thirds of the Chinese territory’s greenhouse gas emissions come from electricity generation, said the city’s Chief Executive Carrie Lam in her 2021 policy address.

Across the world, about 34 percent of tenants have signed green lease clauses, while an additional 40 percent are expected to do so by 2025, based on a Jones Lang LaSalle (JLL) survey of 647 senior executives published last June.

However, Law believes the adoption of green leases will take time in Hong Kong.

Key challenges to its local adoption include lease terms that may be shorter than the payback period, as well as issues of not having a holistic view on the overall value for both landlords and tenants, explained Cary Chan, Executive Director of Hong Kong’s building council.

“Currently we don’t see many green leases in Hong Kong,” said Sam Crispin, Regional Head of sustainability and ESG at consultancy Savills. Still, he revealed that he is presently advising a local client regarding the possibilities of adopting a green lease at a mall.

“This may include longer lease terms, food waste reduction clauses, and perhaps an all-electric food court kitchen,” Crispin disclosed. Green lease clauses are mostly driven by landlords, although some bigger tenants are also interested in pushing for it, he added.

“Green leasing is a strategy to help tenants and landlords achieve the best returns for their expenditure, and save money through the adoption of energy-efficient measures. Companies today are looking for landlords who are able to ensure (commercial properties) with high energy efficiency,” noted Mark Cameron, Head of energy and sustainability for Asia Pacific at JLL.

However, Cameron and Deloitte’s Law both called on the Hong Kong government to consider introducing more policies to encourage adoption of green leases here.

“Currently, there are no existing policies regulating any building owners to have any green leases in place. If the government would give tax incentives or subsidies… the adoption rate may be higher,” said JLL’s Cameron.

“In the long run, the reputation of Hong Kong as an international city can be enhanced, and (it can) attract more talent and capital” with the adoption of green leases, added Deloitte’s Law.

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