Daylighting has long been recognized as a potential energy-efficient design strategy for buildings. Natural light can help reduce the electrical demand and the associated sensible cooling load due to artificial lighting In Hong Kong, however, many buildings are constructed close to each other and hence the external environment plays a significant role in daylighting designs. This paper investigates the shading effects due to nearby obstructions when daylighting schemes are being employed. We used the computer simulation tool, EnergyPlus, to illustrate the energy performance of a generic commercial building with daylighting controls obstructed by neighbouring buildings of various heights. Analysis of electricity savings was carried out for the perimeter zones of the whole building and individual floors. Regression techniques were conducted to correlate the building energy savings and the angles of obstructions. It was found that the shading effects due to nearby obstructions strongly affect the building energy budget when daylighting designs are used. Building designers should critically consider the external environment in order to achieve energy-efficient building designs. (C) 2007 Elsevier Ltd. All rights reserved.