Is Asia the World’s Green Beacon?

aeiforia-technos4-0113Is Asia the hot spot for green office buildings in the world? Right now they are certainly poised to be. Take Singapore and its Green Mark certified green building path, for example. The government has set the benchmark of having 80 percent of all buildings be certified green by 2030. This push by the Building and Construction Authority (BCA) started in 2005 and has currently reached a 29 percent gross square footage water mark. This is not driven by demand either but simply by what has become the new normal.

The data as reported by Business Times is that most building owners are detailing that tenants in Singapore are trending towards being multi-nationals and large domestically listed corporations and show a penchant for having sustainability as a core value and key strategy. These companies are serious when it comes to owning up to reducing their carbon footprints by executing aggressive climate strategies and demonstrating these efforts to their key stakeholders (shareholders, clients, employees and the general public).

Many of these commitments revolve around working environments that are sustainable or have robust green initiatives in place and can handle growth. The financial services sector has the strongest commitments followed by Internet and data companies, construction and real estate, as well as energy and commodities. As incentive, many of these companies can take advantage of tax breaks in their country of origin, particularly in the U.S. and Europe.

The outlying question is how does this translate into real dollars from a rental standpoint? Can green buildings command higher rents? It is not an easy answer as there are too many variables such as location, floor plate efficiencies, proximity of other amenities and included amenities with in the building or complex. This most often includes technology from the Information Communications Technology Industry (ICT) such as access to IT connectivity, smart building technology and efficient low-voltage lighting and controls. These larger companies can often tolerate the higher rents as result because they can take advantage of larger savings in operations as a result of green tech and other sustainable aspects of these properties.

The data does show a drop off as expected in the small and medium sized businesses not willing to forgo razor-thin profit margins for better-built, higher-efficiency buildings. This is not to say that things are not happening in these markets in Asia — quite often there is acknowledgement and certification of greening up the interior fit out of a space even if the building itself isn’t green. It is often a herd mentality: that whole buildings that may not be green in bricks and mortar can wind up being just as efficient as their higher rent counterparts through having multiple tenants with sustainable fit outs.

In any case, as I have written about before on many occasions, sustainable work environments provide not only great benefit to the environment but will ultimately effect profitability making these decisions relatively easy for companies. That said, companies in Asia are definitely seeking out green building amenities and supplementing deficiencies through smart fit-outs.

So why has this become the new normal? Perception is everything. Just like many consumers come to expect certain things from products such as safety features in a car, prospective tenants expect developers and building owners to provide a minimum of sustainable features. This incentivizes developers to competitively provide more options to gain market share, which puts them at an advantage rather than having to discount their rental for lack of greenness. In order to accomplish these upgrades, developers are taking advantage of government incentives for green capital under the Urban Redevelopment Authority of Singapore. The fund holders are marking this by increasingly demanding accountability and transparency for sustainability. The government also expect that the developers own companies operate in a sustainable fashion as a means of demonstrating their commitment. This also rolls into private investments as well who are following suit with the government.

None of this is to say that the rest of the world is doing nothing. The Netherlands and Germany are hallmarks of sustainable living weaving it deep into their cultures. Even the United States has a similar high water mark with the Architecture 2030 Challenge. The largest roadblock in the U.S. is the political climate including influences from big oil and gas companies and other major industries who would rather up-regulate to maximize profit rather than deal with sustainability. I am certainly generalizing here with that statement but only one has to watch any news show on either side of the aisle and watch the fireworks especially as we are heading into a presidential election cycle.

One only has to look at real estate giants such as CBRE, Westfield and Simon Malls to see good examples of green building commercial space with incentives. The question will be in the near future is who in the world will lead by example?