European businesses could save $243 billion by reducing wasted space in office buildings

The Edge building in Amsterdam Research published to mark the beginning of World Green Building Week suggests that businesses in Europe could realise savings of up to $243 billion in reduced rental costs alone if their office buildings were refurbished to the most efficient standards. The analysis from Philips Lighting, claims the impact that could be made on rents across the world’s offices if business owners replicated the efficient usage of space achieved in a leading green building. The research suggests that in addition to reducing their carbon footprint, office tenants could see vast financial savings if their buildings were renovated in a way that uses space more effectively, particularly in buildings with a high number of empty spaces. The report calls for a doubling of the renovation rate of offices in developed countries to reach 3 percent per year, which it says will be a key factor in reducing emissions and offsetting increased global demand for energy from population growth and urbanisation.

One of the leading examples of this is how Deloitte accomplished a 50 percent reduction in the space required per employee in The Edge building in Amsterdam compared to its previous premises The Chrystal Tower, through effective use of smart technology.

However the data argues, the potential rent reduction from optimising offices is just a small proportion of the total financial benefit to businesses, which also include lower utility bills and significant gains in the productivity of employees, the largest cost to most businesses.

“Renovating buildings to make them more energy efficient can have a huge beneficial impact on the environment, and when they are renovated properly to encompass smart technology, the additional financial impact for businesses can also be vast,” explained Harry Verhaar, Head of Global Public & Government Affairs at Philips Lighting.

The JLL 3-30-300 rule of real estate suggests that a company’s typical costs per square foot per year are $3 for utilities, $30 for rent and $300 for payroll, highlighting that gains in employee productivity are worth far more to a company in financial terms than rent reductions or increases in energy efficiency of the same percentage.

“Our research looks at the potential savings in rent by optimising space,” continues Verhaar, “whereas this is just scratching the surface of the financial gains that can be simultaneously made by using smart technology. This can significantly reduce bills for energy, water and air conditioning, and generate even greater financial benefits by improving the productivity of employees through enabling them to do things like find a meeting room faster or adapt the light and temperature conditions at their workstation. We are calling for a doubling of the renovation rate of buildings primarily to help mitigate the harmful effects of climate change, but at the same time take advantage of some considerable commercial benefits to businesses.”

Globally, businesses could realise savings of up to $1.5 trillion if offices were optimised in this way. Asia Pacific is the largest market for office space, with a total of over 65 billion square feet of office space. As such, it currently has a potential $977 billion of reduced annual rent for commercial tenants if buildings were optimised in line with best practice.  This is more than the total economy of Indonesia. North America has a total of $220 billion dollars of potential savings, and Latin America over $28 billion-worth.

 

Potential cost savings from reduced rent by ‘greening’ office buildings

Region Total area, 2017 (Square footage, billions)4 Potential ‘green’ cost savings from reduced rent (US$ billions)1
Africa 1.1 $15.9
Asia Pacific 65.6 $977.2
Europe 16.3 $242.8
Latin America 1.9 $28.5
Middle East 1.1 $16.8
North America 14.7 $219.7
GLOBAL 100.7 $1,500.9

 

World Green Building Week is the flagship event of the global green building movement organized by World Green Building Council and led by its network of over 70 Green Building Councils and their 32,000 member companies.

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