Business Times 19 Apr 11;
Developers are coming up with integrated solutions and making sure all relevant parties are involved in the planning stages of a project, reports Uma Shankari
DEMAND for green buildings and green architecture is growing as businesses - especially multinational corporations (MNCs) - now have corporate requirements that restrict them to taking up new space only in sustainable projects.
But while developers recognise the benefits in going green, many are still concerned with the capital outlays that come with constructing environmentally-friendly and sustainable buildings.
The answer, market players say, is to come up with integrated solutions and make sure that all relevant parties are involved in the initial planning and design stages of a project.
'Many of our customers have expressed a need to be located in environmentally-friendly spaces, in particular, multinational and larger corporations which have established such corporate requirements as part of their corporate social responsibility (CSR) movement,' said Tan Yew Chin, executive vice- president for real estate services at business space provider Ascendas.
'Companies such as Standard Chartered Bank, DBS, Citi, Credit Suisse, DNV and many more have also included these requirements as part of their criteria in their location searches,' he added.
Added Esther An, head of corporate social responsibility at City Developments: 'In the leasing market, there is a growing demand especially from MNCs, whom we are starting to see include green buildings as a criteria when sourcing for office space.'
In addition to having a CSR agenda, companies also hope to enhance the productivity and well-being of their employees by taking up space in sustainable developments, said Keppel Land chief executive Kevin Wong.
Citigroup, for example, is committed to sustainable design and construction. The bank will always adhere to occupying buildings that qualify for top sustainable awards such as Singapore's Green Mark or the US LEED awards, said Michael Zink, Citi Singapore country officer and country head.
'Our global commitment to sustainable design and construction also means that we select office buildings with top-rated environmental credentials or work with developers who can custom-build such specs into the space,' Mr Zink said.
Citi's current buildings at Changi Business Park, which were built-to-suit, was awarded the Green Mark Platinum award by Singapore's Building and Construction Authority (BCA) as well as the Gold LEED Certification from the US Green Building Council.
However, there is still one major obstacle to buildings going green - the higher cost involved. Developers estimate that they need to spend up to 5 per cent more to build an eco-friendly development.
Keppel Land, for example, said it invests up to 4 per cent of the construction cost of a development on green design and features. City Developments has been investing 2 per cent to 5 per cent of the construction cost of a development on eco-friendly features from the stages of development design and construction to maintenance and use, it said.
And while businesses have said that they would be willing to pay more to occupy sustainable real estate, most developers are unwilling to put that to the test.
Findings from a global survey on corporate real estate and sustainability by CoreNet Global and Jones Lang LaSalle in late-2009 showed that occupiers are more willing to invest in sustainable space despite higher costs. Of those surveyed, 89 per cent also indicated that sustainability was an important consideration in their location decision.
But for now, developers are absorbing the extra cost involved when they build an eco-friendly project. In return, they hope to save on electricity costs and boost their brand.
Green buildings are up to 5 per cent more expensive to build, but are more efficient to operate, Siemens said. The German engineering conglomerate estimates that with innovative technology and intelligent usage, 'smart' buildings can save between 20 and 40 per cent energy usage.
On its part, City Developments estimates that some $8 million in electricity costs will be saved annually from its 20 buildings that have been awarded the Green Mark certification from the BCA in 2008 and 2009
Older buildings
In addition, branding is another key incentive; while the green economy is still at its infancy and demand for green buildings is only just starting to grow, City Developments hopes that its position as a pioneering green developer will give it a first-mover advantage when the age of socially responsible consumerism dawns.
Developers also hope that as the demand for sustainable development grows, and as more market players move towards building green buildings, the situation will improve.
'The industry is still at an early stage in sustainable development and the initial costs of utilising environmentally-friendly materials and solutions may be slightly higher compared to traditional solutions,' said Ascendas's Mr Tan. 'This could be due to a lack of economies of scale in terms of the demand and supply of these solutions.'
One way developers can develop environmentally-friendly real estate at a lower cost is by incorporating green design features through the strategic orientation of buildings, and featuring naturally ventilated spaces - initiatives which do not necessarily entail higher costs.
Developers should also make sure that existing buildings are not neglected, academics have said. Older buildings generally have lower energy efficiency. They can be given a 'touch-up' - at a cost that is much lower than building a new project from scratch - to make sure they are energy-efficient.
In fact, the gap between the cost of building a green project and building one with a lower energy efficiency is already beginning to narrow, industry players said.
A significant proportion of green buildings are now built at no additional cost, said Nadarajah Bala, president for United Technologies International Operations.
And, in fact, in about five years' time, existing commercial assets with less than average energy rating could see a 10-20 per cent discount in valuations, he added. 'We are already seeing major occupiers setting LEED Gold as a minimum occupation standard. Future international legislation will force carbon reduction in all areas.'
Looking ahead, developers said that they will try to take an integrated approach when building, so that all stakeholders will do their parts to green their operations.
'For integrated solutions to work optimally, it is necessary for all relevant parties to be involved in the initial planning and design of the developments,' said Keppel Land's Mr Wong.
There is also a need to constantly engage and educate tenants on how they too can green their operations and adopt a change in mindset, he added.
Ascendas also consults with its customers and works to understand their needs before customising and aligning its business space solutions with tenants' commitment to improving the environmental impact of their operations, it said.
Around the world, buildings are the highest consumers of energy and one of the main causes of carbon emission. According to research reports, 40 per cent of global energy demand and carbon dioxide emissions and 16 per cent of water consumption are due to buildings.
