Tracking the real estate energy transition

Electricity grids in specific regions will continue to decarbonise

• Global electricity grid carbon intensity has dropped 7% in the period of 2000-2023
• The U.S. has led the way with a 35% reduction whilst Europe has cut 30%. Asia lags somewhat with a 6% reduction
• The outlook for grid decarbonisation remains positive as renewables capacity accelerates and coal is phased out. Future forecasts indicate that several markets are well-positioned to transition or have already met global requirements
• Buildings located in low carbon intensity grids will ultimately be cheaper to transition to net zero carbon, as they will not need to reach the same low levels of energy intensity to achieve net zero carbon standard

The impact of grid decarbonisation on the energy transition

Technology to make buildings more energy efficient will continue to improve and reduce in cost

• Reducing energy demand from existing and new buildings is key to the transition
• To meet future projections, a further 44% reduction in energy intensity is required so continued innovation and cost reduction of technologies is paramount
• While costs continue to fall for key technologies, challenges persist with implementation due to costs of installation, need for upfront capital and installer availability. A further consideration of electrification is the cost of electricity, which in some cases can be higher than using natural gas

The impact of cheaper technology on the energy transition

Occupiers’ net zero carbon goals will inform their space requirements

• Strong occupier demand is a crucial factor in decarbonising buildings
• In 2024, more than 7,300 companies representing over 40% of global market capitalisation had an approved Science Based Target in place. The number of signatories has risen exponentially
• This growth in occupier demand is being met by a limited supply of suitable assets. Recent data suggests a 70% supply shortfall in low carbon office buildings out to 2030
• The supply/demand dislocation can be seen to produce rental premiums in certain markets where data indicates premiums of 5-10% are possible
• When considering allocations, there are opportunities where a supply/demand imbalance exists

The impact of occupier demand on the energy transition