Singapore is leading the region in the transformation to a sustainable society built on the principles of protecting the environment and preventing climate change. At a corporate level, C-suite executives are pursuing company goals with environment, social, and governance (ESG) principles in mind. 

Landlords who take into consideration the environmental aspect of corporate development goals are able to appeal to a wider tenant customer base. Singapore saw this shift to more sustainable building practices nearly two decades ago and have been able to prepare the country for this evolution in the commercial real estate market.

First, let’s find out what is Singapore’s Green Mark Certification, how it works toward the greening of buildings, and its implications for Singapore’s commercial real estate sector. 

The Era of the 'Green Premium' is Ending

Historically, achieving a BCA Green Mark Platinum rating was a differentiator, a badge of honour that signaled a premium asset. In 2025, however, the goalposts have shifted. High environmental certifications are no longer a "nice-to-have" marketing feature; they are the baseline expectation for any Grade A asset in Singapore.

The conversation has moved from marketing to survival. With environmental sustainability mandates tightening from both the Singapore government and global investment committees, assets that fail to perform are being devalued. We are witnessing the end of the "Green Premium" and the onset of the "Brown Discount", a price reduction applied to assets that require significant capital expenditure to meet modern standards.

This bifurcation is evident in the data. While headline rents across the island appear stable, the underlying currents tell a story of divergence. As noted in theSavills Singapore Office Briefing Q1 2025, the market is witnessing a continued flight to quality. Tenants are consolidating into newer, more efficient spaces, leaving older, inefficient buildings vulnerable to extended vacancy periods. For the asset owner, this confirms that obsolescence is the greatest risk to portfolio value. The only way to protect that value is to move from superficial compliance to structural decarbonization.

The Trap: Defining the 'Stranded Asset' Risk

A "Stranded Asset" is defined as a property that suffers from unanticipated or premature write-downs, devaluations, or conversion to liabilities because it cannot meet new regulatory standards or tenant requirements. In Singapore, this risk is compounded by the forthcoming Mandatory Energy Improvement (MEI) regime, which will legally require energy-intensive buildings to audit and upgrade their systems.

However, the primary driver of this risk is not government policy; it is the tenant. The nature of work in Singapore has evolved, and the physical requirements of the office have changed with it. Tenants are demanding smarter, more responsive environments that can handle the dynamic loads of a hybrid workforce.

AsSingapore drive higher GenAI adoption and value flexible work, the buildings they occupy must be equally intelligent. Modern tenants require infrastructure that supports heavy compute loads for AI applications while simultaneously managing the variable cooling needs of a flexible staff headcount. A static, inefficient building from the early 2000s simply cannot support the energy profile of a modern, tech-heavy occupier.

The consequence is binary: if a building cannot verify its carbon performance through granular data, global tenants with their own Net Zero targets cannot sign the lease. The building becomes "stranded", unrentable to the covenant-strength tenants required to support its valuation.

The Solution: Engineering is the Antidote to Obsolescence

A dangerous misconception persists among some landlords that they can "offset" their way to a net zero building. They assume that purchasing Renewable Energy Certificates (RECs) or carbon credits can mask physical inefficiencies. This is a flawed strategy. Offsets are an operating expense that rises indefinitely, whereas efficiency is a capital investment that pays dividends.

You cannot buy your way out of physical inefficiency. True decarbonization requires hard engineering. It involves the systematic upgrading of central chiller plants, the optimisation of air-side distribution, and the digitisation of energy management systems.

This engineering approach is directly linked to revenue protection. Market data indicates that whileCBD office rents remain steady, specific submarkets are heating up where quality, upgraded supply is available. Capital is flowing decisively toward assets that are "future-ready," widening the valuation gap between the "Green" (efficient) and the "Brown" (obsolete).

This pressure is not unique to the commercial office sector. The industrial sector, often overlooked in the ESG conversation, is facing similar scrutiny as supply chains seek to decarbonise Scope 3 emissions. As highlighted in theSingapore Industrial Briefing Q3 2025, industrial landlords must also navigate these shifts to maintain competitiveness in a cost-sensitive market. An inefficient warehouse that drives up logistics costs through poor energy performance is rapidly losing its appeal to major logistics operators.

The Strategic Advantage: Future-Proofing via Retrofit

For many owners of aging assets, the instinct is to consider redevelopment when faced with obsolescence. Yet demolition is an inherently carbon intensive process that releases massive amounts of embodied carbon. From a sustainability perspective, the most effective building is the one that already exists provided it can be effectively upgraded.

Savills ESM advocates for a "Technically Zero" roadmap which bridges the gap between an aging asset and a Grade A competitor without requiring a total teardown. This process begins by moving beyond simple walkthroughs to investment grade audits to identify exactly where the energy bleed is occurring. This roadmap typically follows three phases:

1. Deep Audit (The Diagnosis): Moving beyond simple Level 1 walkthroughs to Level 3 investment-grade audits. This involves identifying exactly where the energy bleed is occurring, whether it is an over-sized chiller running at partial load or air handling units fighting against closed dampers.

2. Smart Intervention (The Upgrade): Installing IoT controls and sensors that adapt to the "flexible work" patterns mentioned earlier. Modern systems effectively "count" the people in the room and adjust cooling and lighting accordingly, ensuring energy is only used where it generates value.

3. Active Management (The Assurance): Installing continuous monitoring platforms to prevent "performance drift." A building is a living machine; without active tuning, efficiency gains can be lost within months.

At Savills, we do not just consult on ESG and sustainability frameworks; we engineer the outcome. As an accredited Energy Service Company (ESCO), our role is to take the technical risk off the landlord's balance sheet, ensuring that the retrofits deliver the guaranteed savings and performance data required to secure premium tenants.

Conclusion: Do Not Wait for the Mandate

The "Brown Discount" is no longer a theoretical risk; it is pricing into deals happening in Singapore right now. The spread between prime, green assets and secondary, brown assets is widening every quarter.

Landlords who wait for government mandates to force their hand will find themselves upgrading their assets during a bottleneck of labor and equipment shortages. The strategic move is to act now, while the upgrades can still be positioned as a competitive advantage rather than a compliance scramble.

Achieving a net zero building is no longer an aspirational goal for 2030; it is a defensive necessity for the present. The path to protecting your capital value lies in the mechanical room, not the boardroom.

Don't let your building get left behind. Contact Savills Energy & Sustainability Management today to conduct a "Stranded Asset Risk Assessment" and engineer your roadmap to value retention.

¹ Source: Savills Research: Singapore Office Briefing Q1 2025https://pdf.savills.asia/asia-pacific-research/singapore-research/singapore-office/singapore-office-briefing-q1-2025.pdf

² Source: EY Singapore: Employers in Singapore drive higher GenAI adoption and continue to value flexible work arrangementshttps://www.ey.com/en_sg/newsroom/2024/10/employers-in-singapore-drive-higher-genai-adoption-and-continue-to-value-flexible-work-arrangements

³ Source: Savills News: CBD office rents steady, but the City Hall submarket heats uphttps://www.savills.com.sg/insight-and-opinion/savills-news/223894/cbd-office-rents-steady--but-the-city-hall-submarket-heats-up

⁴ Source: Savills Research: Singapore Industrial Briefing Q3 2025https://pdf.savills.asia/asia-pacific-research/singapore-research/singapore-industrial/singapore-industrial-briefing-q3-2025.pdf