17:28 (GMT +7) - Tuesday 12/12/2017

Property

Money well spent

Released at: 08:29, 26/11/2017

Money well spent

Photo: Viet Tuan

Despite higher investment costs, green building developments are being increasingly encouraged given the long-term environmental benefits and cost efficiencies.

by Hong Nhung

The 2030 Agenda for Sustainable Development from the United Nation notes that green construction projects are increasing rapidly in number worldwide. The Dodge Data & Analytics’ World Green Building Trends 2016 Report revealed that the global green building sector continues to double every three years, with 60 per cent of projects going green by 2018, according to surveyed respondents from 70 countries. The higher initial investment is offset by an increase in return on investment as well as reductions in operating costs.

Vietnam, as an emerging real estate market in Asia, has been keener making its property projects “greener” over the last few years. “Despite encountering certain challenges in expansion, it can’t be denied that green buildings have brought a lot of benefits to developers, end-users, and the national economy, society, and the environment as a whole,” said Mr. David Jackson, General Director of Colliers International Vietnam. 

“Green” revolution

The latest figures from the GreenViet Consultancy Company, a green building consultant for more than 50 per cent of all LOTUS projects in Vietnam, show there are now more than 120 green buildings nationwide, of which about 50 have been completed and certified. More than 70 are still in the design or construction process and will receive certification upon completion. Among the 50 certified, some 40 have been built in accordance with international criteria while the remainder have been certified by the Green Building Council of Vietnam (VGBC).

These figures are up dramatically from the 2010-2011 period, when there were only two in the country, and from the 2012-2013 period, when there were 15. There has been encouraging progress made in green buildings in Vietnam, such as the launch of local ratings systems (LOTUS and EDGE), and the increasing number of certified buildings. Frankly speaking, however, compared to other countries, Vietnam is well behind the 2,100 certified buildings in Singapore and the 700 in Australia. Vietnam has over 30 buildings with LEED certificates, down on the 38 in Bangkok, 89 in Kuala Lumpur, and 56 in Singapore, according to Colliers International.

There are a number of green building certifications around the world but in Vietnam the most popular include LEED (US), BREEAM (UK), LOTUS (Vietnam), BCA Green Mark (Singapore), and Green Star (Australia), and certifications in the hospitality sector, such as the Green Globe Standard and EarthCheck. LEED is considered the most common and with the strictest criteria.

Mr. Jackson said that the green buildings market in Vietnam is still in its early stages of development and it is understandable that many investors, buyers, and local real estate brokers have a different understanding about the concept. Despite the minor variations in the different rating systems, green buildings should meet standards in being environmentally-responsible and resource-efficient throughout their life-cycle, being designed, built, and operated to cut the overall impact of the building on human health and the natural environment and improve employee productivity and reduce waste, pollution, and environmental degradation. 

Smart choice

In the early stages, the major motivation of developers in following “green and sustainable” construction came from corporate social responsibility (CSR) programs, were included in brand promotion campaigns, or aimed at minimizing operating costs. This may explain why large foreign or multinational companies have led the trend in Vietnam. Moreover, aware of numerous benefits from green buildings, some major developers have been active and keen on green and sustainable project developments in the real estate market for the last few years.

Green certification systems in Vietnam

Source: GreenViet 2017

Known as the first office building in Vietnam and one of only a few in Southeast Asia with two energy efficiency certificates - LEED Platinum by the US Green Building Council (USGBC) and certification from the German Sustainable Building Council (DGNB) - Deutsches Haus Ho Chi Minh City officially opened its doors in early September to welcome tenants after three years of construction. The 26-story building has a favorable location in the CBD with nearly 40,000 sq m of gross floor area (GFA) and investment of more than $110 million. One of its key features is its double-glazed façade - the latest in German technology. It is the first in Vietnam and the region and emphasizes the need for an energy-saving structure given the country’s harsh climatic conditions.

By presenting itself as a transparent and inviting building, Deutsches Haus Ho Chi Minh City sets a new benchmark and standard in Vietnam in terms of “wellness” for tenants and employees, with a cost-effective design, low-energy consumption, high-quality building materials, and the latest German technologies, coupled with a high degree of sustainability, including the installation of solar equipment and panels to generate renewable energy. “The project’s strategic location will simultaneously allow tenants to attract and retain talent and take full advantage of future infrastructure developments like the urban railway line,” said Mr. Elmar Dutt, Marketing and Communications Director at Deutsches Haus Ho Chi Minh City.

Furthermore, the Ascendas Saigon Bund Company, a joint venture between Ascendas-Singbridge, Asia’s leading sustainable urban development and business space solutions provider, and Saigon Bund Capital Partners, recently announced the opening of OneHub Saigon, its first integrated business park in Vietnam, by 2020. LEED Silver will be applied in the complex’s office towers, especially Office Tower 1, with certification to be issued by the first quarter of 2019. Located at the Saigon High-Tech Park in Ho Chi Minh City, OneHub Saigon covers a total area of 12 ha and features a variety of amenities, including a mixed-use commercial building, seven eco-friendly office towers, two work-office-home-office buildings, and a training center, with a total GFA of 360,000 sq m.

A substantial number of Vietnamese developers are shifting their real estate construction towards green development. The Phuc Khang Corporation was recently among the first in the south to sign a green building development commitment. Diamond Lotus Riverside, its first green apartment project, is being built in Ho Chi Minh City’s District 8 under LEED criteria and is expected to open early next year.

In the hospitality sector, one of Vietnam’s leading developers, the FLC Group, broke ground in June for The Coastal Hill, the first hotel project in Vietnam applying LOTUS and LEED’s highest criteria. Located within the FLC Quy Nhon complex, the hotel will have 1,500 rooms and is expected to open in mid-2018.

Certain barriers

The pace of green construction in Vietnam has been marked by quantity as well as quality but project numbers remain modest due to certain difficulties developers face. “Green buildings are a relatively new concept in Vietnam and have only become popular over the last few years, so it is easy to be misunderstood and, sometimes, abused,” said Mr. Do Huu Nhat Quang, Vice Chairman of the Green Architecture Club Ho Chi Minh City and co-founder of GreenViet. 

In his opinion, only when a building is designed, built, and accepted under at least one green building system and certified by the green building council of its host country can it be called a green project. Moreover, “many developers are cautious when investing in projects with green criteria, because of the additional construction costs,” he said. “The expense will account for around 2-10 per cent of total investment.” Concerns over whether demand for green buildings exists among buyers or tenants also makes many developers more hesitant, he added. 

Going green is a question of balancing higher short-term investment costs with long-term benefits. “The cost premium for going green in tropical areas like Vietnam is between 1 and 10 per cent of a normal building,” said Mr. Jackson. “In addition to cost sensitivity, other barriers to green building development include a lack of high-technology machinery to build and operate a fully green project, limited skilled human resources, a lack of incentive policies from the government, and low awareness among domestic developers and contractors.”

Mr. Truong Anh Tu, Business Development Director at the Phuc Khang Corporation, acknowledged that the company outlaid 10-12 per cent more in initial investment capital in its first green project. However, “we will try not to charge our customers more because an apartment price should solely depend on supply and demand factors, which could cause problems for enterprises,” he said.

The initial investment is unquestionably retrieved over the long run thanks to lower operating costs and potentially higher occupancy rates. “For the office-building segment, the value of a building is reflected in the rental,” said Mr. Jackson. “For the residential segment, buyers will be happy to pay more at first if they can save more later. Investors can take advantage of green construction to promote their corporate image and prestige and increase the market value of the building. So, green construction affects rentals in a positive way.”

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