Thai­land’s Green Real Es­tate

Thai-American Business (T-AB) Magazine - - Front Page - Writ­ten by: Tim Shen

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.

IN­TER­NA­TIONAL STAN­DARD

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.

GOVERN­MENT REG­U­LA­TIONS

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.

Park Ven­tures Ecoplex

AIA Sathorn Tower

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