By Joseph Wong

Corporate net zero carbon (NZC) goals have emerged as powerful drivers of change, catalysing ambitious portfolio decarbonisation plans for occupiers in Malaysia and setting the stage for a transformative shift in the region's real estate landscape. 

As sustainability becomes increasingly central to corporate agendas, there has been a noticeable surge in demand for sustainable buildings, particularly single-family homes, reflecting a growing awareness of environmental responsibility and a desire for healthier, more environmentally conscious living environments.

JLL, a leading global real estate consulting firm, reports that an overwhelming 96% of occupiers surveyed in Malaysia have set their sights on achieving 100% green certified portfolios by the year 2030, a substantial increase from the mere 3% currently holding such certifications. This upward trajectory is not unique to Malaysia; countries like India and Thailand are also witnessing a surge in corporate commitments to sustainability, with over 95% of occupiers targeting full green certification within the next decade.

However, amidst these ambitious sustainability goals lies a daunting challenge: The gap between supply and demand for sustainable buildings. JLL's analysis reveals that across the Asia Pacific region, only two sq ft of low-carbon space are projected to be developed for every five sq ft of demand until 2028, underscoring the urgent need for accelerated efforts to bridge this disparity.

Decarbonisation goals

JLL Asia Pacific environmental, social and governance (ESG) research head Kamya Miglani emphasises the growing significance of green office spaces in the region, stating that in the near future, leasing space in green certified office buildings will no longer be a differentiator but a requirement for occupiers in the region.  “To achieve decarbonisation goals, we are seeing more companies adopt strategies such as energy audits, sustainable fit-outs and green leases,” she said.

Additionally, the transition to renewable energy sources is gaining momentum, with 37% of occupiers in Malaysia acknowledging the indispensability of on-site renewable energy provision in achieving decarbonisation goals by 2030. Furthermore, a significant majority  of 76% anticipate meeting their energy needs through renewables, a stark contrast to the current figure of 17%.

Yet, while the focus on building sustainability gains traction, the impact of interior fit-outs on emissions often remains overlooked. A staggering 67% of occupiers surveyed in Malaysia cite the investments required for office fit-outs as one of their greatest sustainability challenges. Recognising the need to address this aspect of sustainability, there is a growing imperative to break traditional silos and integrate sustainability considerations across all phases of building development, from design to procurement and strip-out.

As occupiers increasingly demand comprehensive building performance and sustainability data beyond certifications, there is a growing reliance on sustainability technology for automated environmental data tracking and reporting. Artificial intelligence is also being leveraged to drive energy efficiency gains, further contributing to the evolution of sustainable building practices.

However, navigating the complex landscape of ESG regulations and reporting remains a challenge for many companies. As regulatory frameworks evolve and become more stringent, it is imperative for companies to identify and evaluate the most relevant standards within the context of their own ESG strategies to ensure alignment with global and regional climate targets.

Malaysia lagging behind

Despite the growing demand for sustainable assets, Malaysia continues to lag behind more mature markets in terms of green certified spaces. Currently, only 37% of the total existing prime office space in Malaysia has obtained any form of green certification, highlighting a significant gap between current supply and future demand.

“Considering the ambitious aspirations of corporations to occupy green certified spaces by 2030, there is likely to be a significant gap between supply and demand. Despite the market being considered competitive and tenant-driven overall, in the green segment, it is clearly a landlord’s market and expected to maintain this position in the medium term,” said JLL Malaysia research and consultancy head Yulia Nikulicheva.

Looking ahead, this presents an opportunity for landlords to enhance existing buildings and develop new high-quality office projects that meet tenants' evolving requirements for space efficiency and green features. However, it is crucial for these initiatives to align closely with tenant preferences, including factors such as floor plate size, ceiling height, column grid and electricity capacity, to ensure their success in meeting sustainability objectives.

While the journey towards sustainability may present challenges, it also offers unprecedented opportunities for innovation, collaboration and positive impact. As companies move beyond mere commitments to implementation, a fundamental shift in mindset is underway, where sustainability is no longer viewed as a cost but as an essential investment in future resilience and success.

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