China sets pace with green property

China sets pace with green property

Tue, 12/12/2017 - 07:55
Chongqing skyline

GOING UP: The amount of certified green building space in Chongqing has increased by 10 per cent since 2014. Photo: Dominik Vanyi

China has become a global leader in the development of environmentally sustainable buildings, trailing only the United States in the number of buildings certified to be green projects under the planet’s most widely used rating system.

China’s 13th Five-Year Plan included a mandate for green building development, requiring at least 50 per cent of all newly constructed buildings between 2016 and 2020 to be green building certified.

The plan also set a target of 2 billion square metres of new green space to be built between 2016 and 2020.

At the end of 2016, there were more than 520 million square metres of building space in China considered to be green, across 336 cities.

A research report by global commercial real estate agency CBRE showed landlords in China have increasingly embraced the Leadership in Energy and Environment Design (LEED) standard, which was developed by the US Green Building Council.

The LEED certification assesses a building on its energy and water use, the materials it is constructed out of and its waste management facilities.

Since 2015, the total amount of LEED certified space in China had increased by 135 per cent, CBRE said, making it the largest market outside of the United States.

More than 80 per cent of LEED certified space in China is commercial space, comprising office buildings or retail developments.

The increase in LEED-certified space is highly correlated to the influx of new office supply in tier one and tier two cities.

CBRE data shows that more than 17 million sqm of new commercial space was developed across 17 major Chinese cities between 2015 and 2017, 1.6 times more than the new supply that was developed from 2010 to 2014.

“Highly competitive market conditions, along with an increased sense of corporate responsibility, has led to the LEED certification becoming a competitive differentiator to attract tenants,” the CBRE report said.

Beijing, Shanghai and Chongqing lead China in LEED certification, with Beijing the first Chinese city to accumulate more than 10 million square metres of certified space.

Major developers which have become leaders in sustainable development in recent years include SOHO China, Excellence Group, Sino Ocean Group and Ping An.

CBRE’s research showed landlords in China that achieved LEED certification attracted a 25 per cent rental premium compared with general buildings, while also achieving higher occupancy rates.

Average occupancy rates over the past four quarters of buildings with LEED certification was 81.7 per cent, CBRE said, 1.5 per cent higher than that of traditional offices.

Occupancy of LEED platinum developments – the highest level of certification – was 10 per cent higher than traditional offices.

The sustainable development trend also has marked effects on employee well-being, with 92 per cent of respondents to a CBRE survey reporting their new space created a positive effect on health, and 94 per cent reporting increased business performance.

Further growth in sustainable development in China is expected in coming years, driven largely by ‘green finance’ principles, part of the country’s economic restructuring strategy.

Last year, China issued its first green bonds, with that market rapidly growing to $US36.2 billion by the end of 2016, according to the China Green Bond Market Report.

However, most of those green bonds have been invested in renewable energy and transport, leaving considerable upside for the real estate sector.

Chinese domestic developer Longfor Properties is seeking to alter that trend, after issuing two batches of green bonds in the first quarter of 2017 to finance green building projects in Chonqing and Shanghai.

“As the government continues to de-leverage and tighten regulations on the real estate market, green finance has become an innovative form of finance for developers,” CBRE said.