Think 'green smoothie' but don't forget to mix it up
More than ever, tenants are looking for the best possible commercial deal in whatever sector of the market they are in. Perceived value is critical and financial conservatism reigns.
However, the stance of larger tenants has differed to that of smaller occupiers, particularly over all things green.
Larger tenants tend to appoint external advisers to drive the process. Of CBRE's top 10 clients, close to 80 per cent have a green professional with high credentials on staff who tends to be very influential in the process of relocation.
However, the biggest movers now are smaller tenants under 1000 square metres who have recently accounted for between 60 and 70 per cent of CBD space demand. They don't like financial surprises and focus on cost identification and containment during leasing negotiations. They are similarly cost conscious about green initiatives.
Occupancy cost is a huge portion of their costs. They are very, very focused on the detail, and undertake a great deal of due diligence during a deal.
So what is the best course of action for landlords and leasing agents, given that smaller tenants are expected to remain a key market driver for the next 24-36 months? My advice is to focus on engagement and conveying how green initiatives can positively impact a tenant's business. Landlord and agent need to know what they are saying and how to communicate it to their target market.
We're also seeing differing trends in certain business sectors, with the greenest tenants tending to be multinationals and engineering firms. Financial groups have been at the less-green end of the spectrum in the past 12-18 months, as have legal firms.
Never assume green considerations are not important, even if they aren't stipulated in a leasing request for proposals. Green is now an implicit requirement in many cases.
The market has also become a little more refined around green discussions so that they form part of an overall matrix. Enter the "green smoothie" analogy. When you make a healthy green smoothie, you know it's green but you also expect other flavours in the mix; apple, banana, etc. Sustainability is somewhat like that, in that tenants will consider a range of attributes for any building, green among them.
Frequently Asked Questions about this Article…
In recent years tenants have prioritised financial conservatism and perceived value, so cost containment drives leasing decisions. That means many tenants — especially smaller occupiers — weigh the upfront and ongoing costs of green initiatives carefully and may only adopt sustainability measures that clearly control or reduce occupancy costs.
Larger tenants often appoint external advisers or employ in‑house green professionals to drive sustainability in relocation and leasing decisions — CBRE notes close to 80% of its top 10 clients have such experts. Smaller tenants (under 1,000 sqm), by contrast, focus intensely on cost identification and containment and are more cautious about investing in green upgrades unless the commercial benefits are clear.
Smaller tenants have been the biggest movers recently, accounting for roughly 60–70% of CBD space demand. They are expected to remain a key market driver for the next 24–36 months, so their cost and sustainability preferences strongly influence leasing strategies.
Landlords and agents should actively engage tenants and clearly explain how green initiatives deliver commercial benefits — for example lower operating or occupancy costs, better comfort or tenant appeal. It’s important to tailor the message to the target market and demonstrate practical, cost‑effective outcomes rather than just listing green credentials.
According to the article, multinationals and engineering firms tend to be the greenest tenants, actively pursuing sustainability. By contrast, financial groups and many legal firms have been at the less‑green end of the spectrum over the past 12–18 months.
Not always. Even if green requirements aren’t spelled out in an RFP, sustainability is increasingly an implicit expectation. Landlords and agents should therefore assume green considerations matter and be prepared to address them during negotiations.
The 'green smoothie' analogy means sustainability is just one ingredient in a building’s overall appeal. Tenants evaluate a mix of attributes — cost, location, amenities, and green features — so investors should present sustainability as part of a balanced value proposition that complements other benefits.
Tenants should do thorough due diligence: identify all occupancy costs, quantify likely savings or expenses from green measures, and negotiate lease terms that limit financial surprises. Clear communication about costs and benefits of sustainability helps secure leases that meet both budget and environmental goals.
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