How is Real Estate going Green?

In recent years, Viet Nam has been integrating sustainability into many of its socioeconomic recovery and development strategies, for example, the Ministry of Finance has made it essential for listed companies to publish annual environmental, social and governance (ESG) impact reports. The Ministry of Construction has created requirements for construction materials and encourages efficient energy and resource use. While Viet Nam still has a way to go, these changes will start to forge a path to a greener and more sustainable country.

There have also been changes in how people want to live and work, now that residents and tenants are more aware of how the spaces they occupy impact the environment. Increasingly, people want environmental safety or green areas and need properties to cater to these demands. If buildings cannot adjust to green demands, they will lose value and long-term tenants.

How Investors Benefit from Sustainable Development

As the whole industry is moving towards carbon neutrality, investing in green developments will help investors demonstrate their commitment, efforts, and responsibility to the environment and society at large. Investors are also likely to benefit in the long term if they incorporate sustainable elements into real estate projects. According to a 2021 study by Savills World Research, the biggest benefit of a green building is improved corporate reputation.

Statistics by the International Finance Corporation (IFC) show that there were 201 green-certified buildings in Viet Nam by Q3/2021. This is a tiny number and represents the vast opportunities investors have to build sustainable projects. Green accreditations will give projects a competitive advantage and are likely to be more profitable in the long term.

Green standards will also attract tenants, especially international businesses. According to Green Street Advisors, green buildings have better occupancy rates than less sustainable projects. Although construction and operating costs for green properties are often higher, tenants are willing to pay more for a comfortable and green workspace.

How to Achieve Net Zero

Sustainable buildings require research and planning at every stage, from architecture planning to operations. Therefore, investors, developers, property managers as well as residents and tenants all need to work together to achieve net zero.

For new buildings, developers need to look at more sustainable building materials. According to United Nations Industrial Development Organization (UNIDO), steel and cement, the most common construction materials, were some of the largest CO2 emitters in 2021. Therefore, developers need to use safer and eco-friendly alternatives, such as biomaterials. Generated from recycled waste and microorganisms, biomaterials save energy in the production process and have a lower long-term environmental impact.

In terms of operational buildings, investors should also work closely with property management service providers to come up with sustainable solutions. As operational buildings are major contributors to CO2 emissions, retrofitting management services and operations is essential.

In terms of property management, a small but crucial change is the lighting systems used throughout buildings. reflective or halogen bulbs below 20 watts/m2. Public lighting in lobbies, hallways, or elevators should also be on timers.

PropTech, or the use of technology and applications in real estate management, is another way that managers can control and manage electricity and water consumption. For example, Savills Property Cube provides automatic updates on resource use, which allows property management teams to monitor, analyse, and adapt to improve efficiency.

As tenants contribute to resource consumption, they should be encouraged to participate in long-term sustainability projects. Property managers can communicate sustainability measures and help tenants understand how to support the environment.

Ms Vu Kieu Hanh, Director of Property Management, Savills Ha Noi shared: “Tenants are paying more attention to creating green living spaces. During our Earth Hour 2022 campaign, we partnered with the World Wide Fund for Nature (WWF) to communicate through message boards, electronic banners, and our Property Cube management software. The positive response demonstrates that our tenants and residents are committed to reducing net emissions. We as a company are also committed to providing energy-efficient solutions and encouraging sustainability in real estate.”

Sustainable developments and green solutions are essential for the real estate industry. For successful implementation, all parties need to participate and commit to a long-term strategy. Green buildings do not just have a good long-term environmental impact but will increasingly support long-term profitability.

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