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The reality of Thailand's green building sector

The development of green buildings in Thailand started just a few years ago. It is in 2007 that the first certified green building in Bangkok was inaugurated. The number has rapidly increased since, nearly doubling every year, and Thailand now accounts for 22 LEED and TREES certified green buildings. If we add the registered green buildings not yet certified, there would be another 67 buildings to add to the list.

In Thailand, a building is certified green if it complies with a number of requirements. There are two main certifications in Thailand: LEED which is the US certification launched by the US Green Building Council and the local Thai certification called TREES, launched by the Thai Green Building Institute which includes some of the LEED requirements such as energy consumption, material and resources, indoor environmental quality, but adds specific requirements such as building management.

Corporate branding spurs green building adoption

According to a white paper titled “Thailand’s Green Buildings Goals” recently released by Solidiance, several factors have encouraged building owners in Thailand to go green in these past six years, with improving corporate image and CSR as parts of the key drivers quoted by companies. Large corporations are more and more sensitive to green concepts to project a better corporate image, especially if these firms develop eco-friendly products. Toyota Motor Corporation Thailand is a good example of a company embracing the green building concept to build an even more eco-friendly image. The Japanese automaker is implementing a worldwide initiative to convert existing dealerships into green buildings. In Thailand, 374 dealers will take part in the program that will run until 2015. Already about 30 dealerships have received the TREES certification. The idea is for the dealership to meet specific standards in energy, water, and quality management to become certified. New eco-dealerships benefit on average of a 40 per cent reduction in energy consumption.

The white paper also mentions the low operating costs as the other key drivers for green buildings. Efficient green buildings allow significant decrease in operating costs resulting in higher savings as the buildings ages over time. One research from McGraw Hill Construction estimated that in Asia (including Thailand), operating costs decrease by 21 per cent over five years for new buildings, and by 13 per cent for renovated buildings going green. The return on investment is on average seven years for green buildings, on par with Singapore and faster than the payback in western countries.

Building owners are now getting more and more aware of an additional benefit which is the possibility to charge tenants higher rental fees than in conventional grade A buildings. For instance, the Park Ventures, which is one of the green building landmark of Bangkok, charges THB 1,100 per sqm per month while on average, the latest grade A buildings charge 750-800 THB per sqm per month. Tenants are keen to pay higher rental fees if their image and their employees benefit from operating in a green building. Again, the corporate image is a key influencer for large multinationals to pay more to operate in eco-friendly spaces.

The overall lack of awareness for green buildings and their benefits also hinder the development of this sector. It remains difficult to find knowledgeable architects, contractors, consultants who are familiar with the solutions that can impact energy efficiency in a building

Higher construction costs and other barriers

Apart from the major drivers encouraging the green building development in Thailand above, there are still significant barriers to overcome to develop the sector further in the long term. Solidiance’s research reveals that the building owners see the higher constructions costs of a green building as a major barrier to switch from the construction of a normal building to a green building. When taking all aspects of design and costs for a new building, and depending on the type of certification sought by the owner, the approximate additional cost for a LEED certified green building can be 3 to 10 per cent higher than a normal building. When converting an unplanned building into a LEED certified building, the cost can be 30 per cent more than to refurbish a normal building. Although there are long term costs savings benefits to operate a green building, many owners are not willing to make the extra investment necessary for their building to be green.

The white paper also shows that the overall lack of awareness for green buildings and their benefits also hinder the development of this sector. It remains difficult to find knowledgeable architects, contractors, consultants who are familiar with the solutions that can impact energy efficiency in a building. Building material and solutions vendors are trying to push for the industry to adopt these eco-energy products, but without enough knowledgeable professionals, adoption of these solutions remains limited. The cost and limited availability of some energy efficient products or solutions also being considered — as many products are still imported, the high costs remain as a handicap to expand a larger adoption of energy efficient solutions.

Lastly, with a few exceptions such as the Circle and Ideo Mobi Sathorn condominiums which have applied for TREES certification, green buildings in Thailand are still limited to commercial buildings. The main reason is high building cost, which is more difficult for individual tenants to bear in residential buildings compared to companies in commercial buildings. Many aspects of a green building are also deemed trivial when put into the perspective of a residential building — i.e. the more expensive high efficient and cleaner air conditioning system may not be necessary to a residential flat where there is no necessity to have air conditioner on constantly.

Pushing the green development harder

Despite these difficulties, overall perspectives of the green building sector in Thailand are positive, and when compared to its neighbors in ASEAN, with the exception of Singapore which is ahead, Thailand’s green building sector is on par with other countries in the region. Mid and long term perspectives are encouraging. The Ministry of Energy is launching new initiative to encourage building owners to make the necessary transformations to make their building green.

There are in fact several initiatives and tax incentives available, but industry professionals are not necessarily aware of them. In order to efficiently lobby the policy makers, industrial players need to regroup to create a collective strength to prompt for regulation change for more green building adoption in Thailand. Developers need to be more convincing in selling out green building projects — they need to outline the actual benefits for the tenants by emphasizing on the return on investment of green building, the competitive edge by going green as a key differentiator, and the value of green certification as a prestige to leverage brand image.

Thailand green building industry will continue to grow fast as long as the right steps are taken to strengthen the regulatory framework and trigger more constraining regulations pushing for energy efficiency in buildings. In the mid-term, the cost of going green will go down as there are going to be more solutions/products and skilled workforce available in the market. More elaborated insight on the development and projection of Thailand’s green building industry is available on the downloadable white paper here.

Mickael Feige is the manager of the Thailand operations at Solidiance, the Asia-focused growth strategy and B2B marketing consultancy firm with sectoral expertise centered on green technology, automotive/industrial application, technology, and healthcare.

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