Sydney, Perth, and Melbourne have been named in the top five green-rated cities for commercial real estate.
According to Knight Frank’s Rising Capital in Uncertain Times report, Sydney was the second most sustainable city for commercial real estate, followed by Perth at number four and Melbourne at number five.
Singapore was named the most sustainable city, with Wellington, New Zealand, coming in third.
The top-ranked cities all share common traits including low carbon emissions per person, ample green spaces, and low urbanisation pressures.
Head of Research, Asia-Pacific at Knight Frank Christine Li said Sydney stood out because of its open green areas.
“Liveable cities like Sydney and Wellington boast ample green spaces that have been critical for inhabitants during prolonged lockdowns, providing a reprieve from highly urbanised lifestyles,” Ms Li said.
“Singapore stands out due to a comprehensive green building certification scheme and an ambitious plan to become a low-carbon built environment.”
However, the report also highlighted the regions’ vulnerability to extreme weather, particularly cities located close to the equator.
Ms Li said investors should still brace themselves for the impact of erratic weather changes on their investment portfolios.
“The Index is closely aligned to what investors are interested in when benchmarking their portfolio and individual buildings,” Ms Li said.
“For example, the number of green buildings in the green score reflects the willingness and proactiveness of the local government and organisations in pushing for a more sustainable built environment.
“It also highlights those cities with an established market of investible green assets.”
According to the report, tenants are increasingly opting for buildings with green features, with landlords commanding up to a 10 per cent premium on sustainably-rated buildings.
In response, developers are likely to expedite the development of sustainable buildings to capture the rising demand for green buildings.
Knight Frank Head of Global Capital Markets Neil Brookes said investors looked for a combination of strong returns and sustainability.
“With debt cost soaring, yield-seeking investors will also be compelled to move up the risk curve to secure the desired spreads,” Mr Brookes said.
“Many will gravitate to more active asset management strategies, such as repurposing and value-add plays, to generate alpha.
“Adopting sustainable measures not only enhances portfolio security but has been proven to add a positive price premium to assets.”