What lies ahead for green buildings?

Ever more localised certification, green leases, and greater transparency: these are some predictions for the future of green buildings around the globe.

Gazing into the crystal ball on future trends for global green building industry, experts at the International Green Building Conference held in Singapore were upbeat on the prospects of the sector.

Tunnie Srisakulchairak, programme officer for the United Nations Environment Programme in Thailand, pointed out that 20 years ago people would ignore invitations to green building events as they did not see how the concept could be important to them. But now, industry leaders jostle to lead the green building drive.

As countries continue to green their buildings, some existing trends will become more entrenched. These include a growing focus on certification with more localised standards, a movement towards green leases - that is, lease arrangements that allow landlords and tenants to collaborate on energy management, and a strong need for transparency at all levels from country to industry, and even to consumer level.

More certification, more localised

In 2014, the top five green building standards globally, including the best-known United States standards Energy Star and LEED, made up 89 per cent of all certified buildings. But this will most likely change in coming years as individual regulators bow to the needs of their local climate and culture. Already, some of the top standards such as Singapore’s Green Mark scheme are highly localised to cater to conditions on the ground.

“We are going to see more and more fragmentation,” predicted Alex Herceg, analyst with Netherlands-based research house LUX Research B.V. at the panel “Global Trends and the Future of Green Buildings“, held at Marina Bay Sands.

“Standards will become localised to specific regions and even specific building types. LEED already has separate certifications for hotels and data centres, recognising that the energy and resource consumption of some buildings are very different,” he noted.

Furthermore, these standards cannot possibly be portable as there is no way to create metrics that can cross borders. Instead, industry players will need to come together to create frameworks within which common acceptable features of green buildings are agreed upon, added Herceg.

A considerable number of today’s green buildings have good design ratings for their local standard or even international standards, but lack performance ratings – suggesting that developers had made no provision for actually operating the building in line with green standards once it was completed.

Susannah West, sustainability director for South Asia, Jones Lang LaSalle Singapore

Susannah West, sustainability director for South Asia with Jones Lang LaSalle Singapore, agreed that standards in the near future will be developed and implemented at country level, and that transparency and communication across borders will be important to their evolution.

More worrying to both speakers, however, is the issue of developers using certification as a marketing tool. As West points out, a considerable number of today’s green buildings have good design ratings for their local standard or even international standards, but lack performance ratings – suggesting that developers had made no provision for actually operating the building in line with green standards once it was completed.

“Everyone is chasing sticker approval for buildings, sometimes at the expense of actual energy performance,” observed Herceg.

This gap between design and operation is likely to continue for some time before the mindsets of building owners and tenants catch up.

“In Australia, one building installed a cogeneration plant and never used it because it was not compatible with their other systems,” shared West. “It was quite an expensive way of generating points [for certification].”

A new lease 

One of the game-changers in green buildings is unquestionably the growth of green leases or best practice leases: arrangements between the landlord and tenant which aims to ensure that the ongoing use and operation of the building minimises environmental impacts.

This form of leasing has lately gained a new name - high performance leasing - as research increasingly reveals that it can significantly improve the performance of buildings.

“Best practice leases are important because a lot of the built environment predates energy efficiency and performance requirements,” said West. In most markets, leased space significantly outnumbers owner-occupied space, and in leased buildings, tenant energy consumption accounts for 50 per cent of energy use.

A 2013 study by Jones Lang LaSalle, for example, looked at 51 green leases in Sydney (about 44 per cent of total green leases at the time) and found that these arrangements added significant value to stakeholder engagement. Furthermore, compared to regular leases, those buildings under green leases were more likely to score higher performance ratings.

Also demonstrated by research in Sydney, the uptake of green leases has been increasing, possibly due to greater awareness of the advantages conferred by environmentally-friendly design and operations.

Prior to 2008, just 15 per cent of the leases in the city were green; by the end of FY2014, the number had increased to 62 per cent.

One of the top focus areas in green leases is energy and environmental performance standards, as these set a benchmark for managing owner and tenant expectations alike.

Stakeholder engagement, including the creation of a building management committee, is another key theme. In addition, transparency, monitoring of energy use, and financial incentives are often key to such leases.

Transparency also figures largely in some of the most common clauses of green leases. For example, green leases typically include clauses on the sharing of utility data and information sharing for green building certification.

It’s all about transparency

Studies have shown that 80 per cent of building owners and tenants are willing to pay more for certified buildings. But, said Herceg, they want data in exchange for that monetary premium - transparency on the building’s performance and features.

The problem is that at the moment, performance gains in green buildings are expressed largely in rental and sales premiums, meaning that they are experienced mainly by owners.

“At present, there is a gap in communicating the value because…it seems to be a winning scenario for the owner, but not for the tenant,” he noted.

This, he explained, is due to the nature of real estate finance. It considers only the capitalisation rate, which is lower for green buildings, but not operational benefits such as energy performance and increased worker productivity.

“The industry needs to quantify human gains,” Herceg said of this gap. “We need to build buildings that improve occupancy experience, productivity, health, comfort.” And, he emphasised, people need to be told about these gains. A multitude of technological tools exist to measure them, but are very poorly implemented in existing buildings.

“We need to bring the mindset that these are tools to make people accountable for data,” he added.

Agreeing, West suggested that information and communications technology providers should be encouraged to provide monitoring systems that act as green tools, and building owners should also be incentivised to acquire such systems.

“The future is about great transparency, information and communications technology, and access to information,” she said.

Eco-Business is producing a special e-newsletter featuring stories on the proceedings at IGBC 2015, kindly supported by City Developments Ltd and the Building and Construction Authority. Sign up to receive the newsletter here.

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