Thailand’s Green Real Estate
While green building has made important progress in Thailand, with some notable landmark projects having been developed, the country has not yet seen adoption at meaningful scale. The market is at a point where most new commercial developments in Bangkok will go for LEED certification but there has been little attention paid to existing stock. The trend is still largely being driven by multinational company ( MNC) occupiers and doesn’t address fundamental issues that would help the industry move forward with a systematic greening of real estate like we’re seeing in other parts of Asia, such as Singapore.
The U. S. Green Building Council’s Leadership in Energy and Environmental Design ( LEED) green building rating system has become a de facto international standard, particularly within the commercial sector. Available for use in many countries before the development of domestic standards ( including in Thailand), the system has been promoted to a ‘ household name’ brand in the industry, being favored by many MNCS with policies to use the system across portfolios. At first glance, the LEED data for Thailand is very encouraging in terms of overall project numbers. At the time of writing, 207 projects have been registered with 103 having already achieved certification – placing Thailand fifth in the APAC region for LEED adoption based on registered projects.
However, drilling down into that data provides a much more nuanced picture, highlighting some key themes that are arguably reflective of the state of green building in Thailand in general. More than a third of the registered LEED projects are for commercial interior fit- outs, which between them represent 64% of the overall certified LEED projects in the country. More than two thirds of these 66 certified commercial interiors projects belong to Starbucks, with another 6 belonging to KFC. While the strong corporate stance to green real estate from both Starbucks and Yum! Brands is laudable, the resulting data shows that there’s clearly no widespread commitment to certification across the occupier sector.
A significant number of the LEED certified buildings in Thailand are build- to- suit or owner- occupier assets, with many belonging to overseas multinationals and several being industrial or logistics facilities. There are some very notable LEEDcertified commercial office projects in Thailand, such as Energy Complex, Sathorn Square, AIA Sathorn Tower, AIA Capital Center, and Park Ventures Ecoplex, which represent an encouraging first step towards the future of green real estate in the country. These have paved the way for a pipeline of 12 more LEED for Core and Shell registered office buildings in progress.
THAILAND’S RATING SYSTEM
Of course, Thailand does also have a national green building rating system, TREES
( Thai Rating of Energy and Environmental Sustainability). To date, there have been 64 projects registered with TREES, eight of which have gone on to be certified. Seven of these are commercial projects but are quite diverse in nature ( 1 distribution center, 4 showrooms, 1 office building and a convenience store). The other project is a residential condominium. While this represents promising progress given that TREES is still relatively new in the market place, even when coupled with the LEED data, it still represents a fraction of the potential opportunity to reduce the environmental impact and enhance the social benefits of Thailand’s real estate stock.
Cost, or at least perceived cost, of green building certification is almost undoubtedly a key factor limiting widespread adoption in emerging markets. In addition to registration and certification fees, green building projects typically require a green building consultant, and the certification strategy recommended by that consultant can have considerable budget implications, particularly if they are not experienced with a particular rating system.
Even if we saw a significant increase in adoption of green building standards within Thailand’s new construction projects, to address the improvement of environmental and social impacts at meaningful scale, the industry would still need to find a way of greening its existing stock. This is no small task, and given that new construction of Grade A office space in Bangkok has represented an average of just 4% of total Grade A by gross floor area year- onyear for the past 10 years, we cannot rely on stock replacement alone to achieve it.
UPGRADING EXISTING BUILDINGS
From a building owner perspective, there are tools available to help confer green credentials to older buildings in a cost- effective manner, even if they weren’t originally designed and constructed as green buildings. LEED for Existing Buildings ( LEED EB) is a good example – as a system focused on the greening of operations and maintenance, and certifying actual building performance, it does not seek to drive capital expenditure, which is a common misconception in the industry.
While the Asia green building story is very much about new construction because of the nature of our growing economies, there is a steadily increasing uptake of LEED EB across the region, led by some landmark buildings such as TAIPEI 101 in Taiwan, which CBRE is currently helping to recertify with the latest version, LEED v4.
In Shanghai, we have seen numerous commercial office buildings seek LEED EB certification in order to remain competitive as almost all new office buildings in the city are designed to be LEED- certified as standard. Having certified more than 500 buildings with LEED EB, CBRE’S experience has shown the system lends itself to buildings of various asset classes and ages – CBRE’S most recent project in Asia was a 26- yearold office building in Seoul.
A well thought out approach to certifying with LEED EB allows building owners to market their assets to green- focused tenants, in addition to enjoying operational cost savings that enhance asset value. The LEED EB process also facilitates proactive dialogue between landlord and tenants with a view to creating a better space for people working in the building, and when approached in the right way, this can actively strengthen relationships between stakeholders, improve landlord reputation, and lead to increased retention rates.
In addition to the growing demand for green buildings from occupiers, many buildings owners are seeking to green existing assets because of pressure from investors, particularly institutional investors such as insurance companies and pension funds who require the funds they invest in to report on their environmental, social and governance risk on an annual basis using the Global Real Estate Sustainability Benchmark ( GRESB), which now enjoys the backing of USD 6.1 trillion of assets under management, and last year had 61,000 properties being benchmarked.
Despite the positive influence of MNC occupier and institutional investors, however, markets where we see the most comprehensive greening across the real estate industry are those in which government introduces progressive regulation to promote it. Good examples from the region include the building energy efficiency disclosure act in Australia, which requires all offices over 2,000 m ² to share their NABERS Energy rating to prospective tenants or buyers.
In Singapore, the government’s Building Construction Authority, which administers the country’s Green Mark green building rating system, has really set the standards, establishing a target to have 80% of buildings certified by 2030. Successive green building master plans, incentive schemes, and legislation mandating Green Mark certification for existing buildings undergoing a major HVAC systems upgrade have laid the foundations to achieve this goal. The Building Construction Authority ( BCA) is also making great strides beyond just consideration of green building certification, however. In 2014 they released sets of green lease guidance notes for office and retail buildings, which is an important step to the necessary integration of sustainability throughout the real estate process.
If Thailand is to achieve similar success and universal adoption of green building, and there are many environmental and socioeconomic reasons why it not only should, but arguably must, then it is fair to say the industry will need help from the government in order to do so. That said, there is still a huge amount the industry can do on its own volition that is not yet being undertaken.
Tim Shen is Head of Sustainability at CBRE Asia. He can be contacted at Tim. Shen@ cbre. com.