_Through the Occupiers' Lens: Rethinking ESG Priorities in the Office Sector

May 23, 2025

Knight Frank publishes its latest Environmental, Social, and Governance (ESG) research report, titled "Through the Occupiers' Lens: Rethinking ESG Priorities in the Office Sector." This comprehensive study, based on the Q4 2024 Occupier ESG Sentiment Survey of 153 office occupiers and Knight Frank’s analysis of 181 office buildings, provides critical insights into how the ESG performance of office properties influences occupiers’ occupancy choices and perceptions of rental values. The report findings also highlight a significant gap between occupier expectations and the current state of the market.

Key Findings:

1. Occupiers Expectations: The report reveals that 48% of occupiers are dissatisfied with the current ESG performance and key features of their office buildings, highlighting a significant gap between occupier expectations and market realities.

2. Financial Incentives: 58% of office occupiers believe ESG features of office buildings influence their perceptions of rental values. Among these respondents:

50% expressed their willingness to pay higher rents for buildings that align with their ESG expectations. Most of these occupiers are comfortable paying up to 10% more for such buildings, indicating a “green premium”.
On the other side, many occupiers expect discounts of up to 20% for buildings with poor ESG performance. This creates what’s known as “brown discounts”.

3. Top ESG Features: Six key traditional and rising ESG features significantly influence occupier rental perceptions and occupancy decisions.

Traditional features: convenient access to public transport (89%*), security and access controls (66%*), onsite and nearby amenities (63%*);
Rising ESG features: energy, water and waste reduction system (75%*), indoor air quality monitoring systems (65%*), and building management and smart control systems (62%*).

*The percentage of occupiers, among those who believe ESG features of office buildings influence their perceptions of rental values and occupancy decisions, selected the ESG feature.

Market Reality on ESG Features:

Utilising its internal database, Knight Frank mapped the availability of 17 key ESG features across 181 office buildings. This analysis provides a snapshot of the ESG-integrated building landscape, highlighting both progress and gaps in the market’s response to evolving tenant demands.

The report reveals a critical disconnect between occupier needs and the existing conditions of leased properties. Despite 78% of landlords pledging sustainability, four occupier-favoured features have adoption rates below 50%. This gap presents a strategic opportunity for landlords to enhance asset value and align with the growing emphasis on sustainability in commercial real estate.

Strategic Recommendations:

Knight Frank offers practical strategies for both occupiers and landlords to navigate the evolving ESG landscape:

Occupiers: Acting on ESG Requirements

1. Set ESG Goals: Assess key ESG goals and priorities important to stakeholders.
2. Research the Market: Evaluate buildings based on the occupier’s own environmental and social goals.
3. Discuss ESG with Landlords: Working with the landlord, identify and monitor ESG metrics to track and improve building performance.
4. Design Sustainable Workspaces: Use eco-friendly materials, energy-efficient systems, water-saving solutions, and natural light in office design and operations.
5. Track Performance: Monitor ESG metrics such as energy use, emissions, or green certifications as well as conduct regular audits.

Landlords: Enhancing Assets to Unlock ESG Opportunities

1. Drive Strategic ESG Upgrades: Assess building performance and market trends as well as perform cost-effective analysis to prioritise cost-effective ESG upgrades.
2. Rental Analysis: Conduct a rental analysis to quantify the financial benefits of ESG-compliant buildings in Hong Kong’s market.
3. Sustainable Property Manager: Engage property managers with expertise in sustainable practices to oversee ESG implementation.
4. Renewable Energy and Data Transparency: Increase adoption of renewable energy sources and install systems for occupier-accessible energy, water, and waste data monitoring.
5. Occupier Engagement: Strategise occupier engagement programmes, such as green workshops and sustainability pledges.

From left to right - Elaine Kong, Senior Business Strategy Manager, Professional Services; Wincy Wan, Assistant Manager, ESG and Keiko Pun, Manager, ESG at Knight Frank.