Following the release of New Era of China’s Green Buildings in 2015, CBRE published another white paper—Towards Excellence: Market Performance of Green Commercial Buildings in the Greater China Region, in conjunction with the US Green Building Council (USGBC).
The report analyses the market performance of LEED-certified Grade A office projects in ten major markets in the Greater China region, including four tier-one cities (Beijing, Shanghai, Guangzhou and Shenzhen), four tier-two cities (Chengdu, Hangzhou, Wuhan and Tianjin) along with Hong Kong and Taiwan. The report explores a number of indicators such as rental premium, rental growth, occupancy rate and attractiveness to high-quality tenants, underlining their competitive strength in today’s commercial real estate market.
Highlights of the Report:
- In most cities analysed, the rental premium for LEED-certified Grade A offices is in the range of 10-30 per cent, compared to non LEED-certified samples.
- The number of MNC occupiers in LEED-certified Grade A office buildings is 100-150 per cent higher than non LEED-certified buildings (measured by samples completed during the same period).
- Beijing, Shanghai, Guangzhou and Shenzhen showed the fastest growth in the number of LEED-certified buildings. These four cities have an aggregate 3.84 million sq. m. LEED-certified Grade A office buildings; accounting for over 70 per cent of the LEED-certified buildings in the ten cities surveyed.
- The Chinese government is increasingly supportive of green building initiatives. Local governments have started to provide policy support, such as introducing subsidy policies to reward projects with LEED certification.
“Every story about LEED is a story about leadership and this report clearly demonstrates that leaders in China know that LEED enhances a company’s triple bottom line,” said Mahesh Ramanujam, COO, USGBC and President, GBCI. “China is no exception: leaders across China are committing to building healthier, more sustainable communities where buildings perform at a higher level and human health is prioritised and enhanced.”
Sam Xie, Head of Research, CBRE China, commented, “the status and performance of green buildings in Hong Kong and Taiwan should serve as a good reference point for the prospective outlook of the green building market on the mainland. LEED promotion and certification started relatively late in Hong Kong and Taipei, but it has recorded considerable development since then. LEED-certified Grade A office space in Hong Kong and Taipei registered an average annual growth rate of approximately 28 per cent and achieved a 30 per cent rental premium. Greater awareness among the public and enterprises of environmental protection and sustainable growth will play a positive role in promoting increased market acceptance of green buildings. “
LEED certification gaining increasing recognition; LEED-certified office space growing steadily
Commercial green building certification is considered to be an embodiment of social responsibility, as well as a way to enhance the reputation of the projects and businesses, eventually attracting a high-quality tenant mix. As such, LEED certification has been attracting higher attention from developers.
CBRE’s statistics indicate that LEED-certified Grade A office buildings provide in excess of 5.6 million sq. m. of space across the ten selected major cities in Greater China in 2015, growing steadily by 7.4 per cent y-o-y. This accounts for 28 per cent of the total Grade A office space.
LEED certification supports above-average pricing strategy in tier-one cities, underpinning rental premium
Mainland China tier-one cities top the market with the fastest development trend of steady growth. The relatively higher proportion of foreign enterprises in the Grade A office market in Shanghai gives rise to higher requirements for the sustainability of building amenities and facilities. LEED-certified office projects in Shanghai recorded a 13 per cent rental premium than that of non-LEED certified samples.
LEED-certified Grade A offices in Beijing recorded the lowest rental gap among tier-one cities as Beijing has seen rental hovering at a plateau for several years. Property owners of LEED-certified office buildings have limited ability to further raise rents due in part to the restrained rental affordability of tenants. Even so, LEED certification has gradually become a popular choice for new buildings. LEED-certified Grade A offices account for 38 per cent of the total Grade A office floor area in Beijing in Q1 2016, as compared to only 17 per cent in Q1 2008.
Stephen Tam, Senior Director of Asset Services, CBRE China, commented, “green buildings do not only save energy, and they do not necessarily represent vast investment. In fact, multiple performance indicators show that green buildings can help reduce investment costs for developers and cut down operational expenses later in the property’s life cycle.”
LEED certification is the world’s earliest and most widely accepted third-party accreditation system for green buildings. Covering both new constructions and existing buildings, the system evaluates a spectrum of areas including sustainability in site selection, water use efficiency, energy, selection of materials and supplies, as well as indoor air quality. Improvement in comfort levels based on tenant feedback is another important aspect in LEED certification.
About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (in terms of 2015 revenue). The Company has more than 70,000 employees (excluding affiliates), and serves real estate owners, investors and occupiers through more than 400 offices (excluding affiliates) worldwide. CBRE offers strategic advice and execution for property sales and leasing; corporate services; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting. Please visit our website at www.cbre.com.
To obtain a full copy of the report or to arrange to speak with a CBRE expert, please contact Harry Thompson.