The world is facing a 70% supply shortfall in low-carbon buildings, new report says – here’s why

A race for low-carbon buildings is about to begin.

In the next one to two years, expiring leases and decarbonization laws will trigger a big jump in demand for offices that are energy efficient, free from fossil fuel systems – like gas boilers – and run on 100% zero-carbon electricity, predicts real estate company JLL.

But demand is expected to outstrip supply.

Buildings and infrastructure such as roads and bridges create about 40% of the world’s carbon emissions annually, according to the World Economic Forum.

By 2030, countries and businesses globally have committed to halving greenhouse gas emissions, which are warming the Earth and worsening climate change. This is less than seven years away.

But in its latest report, The Green Tipping Point, JLL notes that a third of leases with carbon commitments will expire within two years.

This means new leases signed today with an average seven—to 10-year lease term will “collide” with the 2030 emissions timeline—a critical checkpoint on the world’s journey to net zero emissions by 2050.

“Corporate occupiers must show proof of progress in their commitment to operate more sustainably, and buildings need to catch up,” JLL says.

More than 7,600 businesses have committed to carbon reduction goals through the Science Based Targets initiative (SBTi), which gives companies a clear pathway for reducing their emissions in accordance with the Paris Agreement's goals.

“What will ultimately drive decarbonization across the building stock is a solid business case, which is becoming more and more quantifiable,” says Kalin Bracken, Lead, Real Estate Industry, World Economic Forum.

“The supply-demand gap research for commercial offices is compelling and demonstrates the appetite from occupiers for space that aligns with their overall corporate sustainability goals.”

The World Economic Forum’s Green Building Principles, produced in partnership with JLL, set 10 guidelines for achieving net-zero buildings and meeting climate goals. Partners committed to its emission reduction requirements become part of an active community that regularly convenes on the topic.

While demand for low-carbon buildings is growing, levels of retrofitting need to increase to meet this.

In 21 cities around the world, JLL says 30% of the projected demand for low-carbon space will not be met by 2025. This gap could potentially widen to more than 70% by 2030.

London, Paris, New York and Sydney are all facing respective low-carbon building supply gaps of 35%, 54%, 65% and 84%, respectively, by 2030, the report predicts.

Finance, technology and professional services firms are expected to drive most demand for low-carbon buildings over the remainder of the decade.

Climate regulation is fuelling this rising demand for low-carbon buildings, the report notes. For example, France’s Décret Tertiaire – Tertiary Decree – aims to cut energy use in buildings by 40% by 2030 and by 60% by 2050. Fines can be imposed if targets aren’t met.

The European Union is also developing performance standards to cut the emissions and energy use of buildings.

In New York, JLL says only 4% of the best-quality office buildings currently meet new laws limiting emissions from buildings. More than 30 other US cities plan similar rules.

And in Sydney, securing clean power to supply all-electric buildings without fossil fuel systems like gas boilers, “remains a challenge,” JLL says.

Another factor driving demand for low-carbon buildings is the introduction of rules in economies including the US, Canada, the UK, the EU, Australia, and China, where companies are required to report publicly on their environmental, social, and governance performance.

For building occupiers, the need to show progress on cutting emissions means the sustainability of their buildings will be a core deciding factor on where they are located.

Occupiers and landlords will need to collaborate to reach net zero goals, including through retrofitting, JLL says.

Building investors and owners should prioritize measurable actions to cut emissions across their properties. They should also work with occupiers as partners in decarbonizing their buildings.

The net-zero transition is an opportunity to attract new tenants and also unlock wider opportunities that help to reframe districts and cities as sustainable destinations, the report adds.

A big part of the carbon emissions from buildings comes from producing the building materials used in them, the World Economic Forum explains.

Concrete and cement, in particular, generate about 30% of the carbon emissions from buildings – and are the most consumed human-made resources on Earth.

In its white paper, Scaling Low-Carbon Design and Construction with Concrete: Enabling the Path to Net-Zero for Buildings and Infrastructure, the Forum explores how to reduce emissions from cement and concrete by using low-carbon materials and design techniques.

By 2030, emissions from concrete in a project can be cut by up to 40% through routes such as decarbonizing how it is made – by using renewable energy as the power source – the paper suggests.

Other solutions include using a lower carbon type of cement known as blended cement and reducing the volume of concrete used in a project.