Nicolaas Waaning, who manages ING’s global real estate portfolio, faces a straightforward operational constraint. ING committed to net zero by 2035, intending to shift to sustainable buildings as leases expire. Yet ninety percent of the portfolio remains non-compliant—not because of internal inertia, but because the market cannot deliver enough sustainable assets to meet tenant demand.
The Tenant That Can't Find What It Needs
Waaning’s position is direct: ING needs ESG-compliant buildings, but the market is not supplying them. This is not a case of one company outpacing the industry. It signals a broader shift—corporate tenants with net-zero targets now treat sustainability as a leasing requirement, not a preference. Supply has not kept pace with this change.
From Premium to Requirement
The financial logic around sustainable buildings has shifted. The green premium—higher rents for certified assets—no longer tells the full story. The more relevant figure is the brown discount: the penalty for failing to meet sustainability standards. In Singapore, green-certified Grade A offices earn premiums of 4 to 9 percent, with top assets reaching 15 to 20 percent above market. Properties lagging on ESG face discounts up to 30 percent, higher vacancy risk, and the real prospect of becoming stranded assets—buildings unable to attract tenants or financing, regardless of location or quality.
This reframing matters because a premium is optional to chase. A discount, applied automatically to a growing share of the market's buildings as sustainability requirements tighten, is not something a landlord can opt out of.
The Stranded Asset Numbers Are Getting Real
The scale of this risk is no longer theoretical. A survey of senior European commercial real estate asset managers across the UK, Germany, France, Spain, and Italy, collectively overseeing roughly US$240 billion in assets, found that nine out of ten respondents believe at least 20 percent of their portfolios are at risk of becoming stranded assets within the next three years specifically due to poor energy performance. Separate analysis of interim 2030, 2040, and 2050 net-zero targets found that risk climbs to more than 80 per cent for buildings currently failing to meet those benchmarks. Real estate accounts for roughly 39 percent of global energy-related CO2 emissions, which means the sector sits directly in the path of tightening regulation as well as tightening tenant demand, a double pressure that is compressing the timeline landlords have to respond.
Why Tenants Are the Ones Forcing This
The main pressure is coming from tenants, not just regulators. Multinational companies now use office sustainability as a lever for talent attraction and retention, making it a strategic priority. Green leases—contracts embedding data sharing and energy efficiency—have become standard for sophisticated tenants. Investors reinforce this trend: over 70 percent of institutional investors in Asia-Pacific plan to increase exposure to sustainable assets. Access to capital is tightening for landlords whose properties fall short on ESG, regardless of underlying fundamentals.
What This Means for Landlords Now
For property owners, the issue is urgency. The upside of sustainable investment—asset value, rent premiums, lower costs—is clear. The risk is now more pressing: landlords who treat sustainability as optional are finding that tenants like ING will not lease their space at all after expiry, regardless of price. Retrofitting and specifying sustainable materials is no longer about chasing a premium. It is about avoiding exclusion from a tenant market that has already set its requirements and is telling the industry supply is insufficient.
Is your real estate strategy prepared for tenants who now treat sustainability as a requirement, not a preference?
