From LEED Certification, Wellness in Workplace to Green Finance, Green Building Develops at Fast Pace in China

CBRE and USGBC Publish China Green Building Annual Report 2017

Shanghai, Nov. 10th, 2017 – Driven by a series of government policies to encourage green building practices, China’s green building market is undergoing tremendous growth. Over 600 million sqm are accredited green building space, covering more than 300 cities. It is estimated that new supply of green building space will reach 2 billion sqm by 2020.

With the fast development of green practice, CBRE and the U.S. Green Building Council (USGBC)—the creators of the LEED green building program— jointly published the China Green Building Annual Report 2017. The report provides a comprehensive overview of LEED and WELL certification development and trends in China, as well as the emerging Green Finance in the market. 

Major LEED advancements in China

Since its first introduction to China in 2001, LEED-certified projects undergone a rapid growth, during 2005-2016 at a compound growth rate of 77%. By August 2017, over 48 million sqm of projects across 54 cities had been LEED certified. As of 2010, China has sustained its position as the largest LEED market outside of the US, accounting for over 9% of the global market and 32% of international market (excluding US).

"As a global leader, China’s involvement in a sustainable built environment is essential and the nation is rising to the task,” said Mahesh Ramanujam, president and CEO of U.S. Green Building Council and Green Business Certification Inc., the body that certifies all LEED projects worldwide. "In the last several years, I have personally witnessed the rapid expansion of China’s commitment to green building and the important accomplishments the country has made. The exponential growth of green building in China is a remarkable achievement and the positive effects benefit us all.”

Office buildings are the main property type seeking LEED certification in China. According to CBRE’s prime office data, as of first half in 2017, a total of 148 LEED certified projects in 17 major cities had accumulated more than 10 million sqm. Of which the top four cities (Shanghai, Beijing, Chengdu, and Shenzhen) had each averaged more than 1 million sqm. Shenyang, Hangzhou, and Wuxi listed as top growth hotspots.

There are two key drivers for the rapid advancements of LEED offices. Firstly, in terms of occupancy and rental performance, LEED-certified office projects out performed non-LEED buildings with 25% higher on rent and 1.5% higher on average occupancy rate. Notably, office buildings which gained LEED Platinum certification (the highest standard in LEED) can gain 10% more in rent premium than non-LEED Platinum offices, as Platinum properties are relatively rare in the market and generally post better yields. 

Secondly, lower maintenance costs and increase market competitiveness for existing old office buildings. Shown in “World Green Building Trends 2016” survey results, Chinese respondents believed that maintenance costs would drop by 4% in the first year after renovation and would continue to go down by 9% in the first 5 years. So far in China, LEED EB:O&M (Existing Buildings: Operations & Maintenance) certifications has been applied to 1.6 million sq.m  space for over 20 existing prime office projects (8 years old on average) ,  representing a 136% growth rate since 2015.

Sam Xie, Head of Research, CBRE China, commented, “with the rise of sustainability awareness, domestic real estate enterprises are following the footsteps of Hong Kong developers and foreign-funded companies and are making aggressive moves in the green space. From landlord’s point of view, LEED certified projects are more resilient in response to over supply challenges.  For occupiers, talent attraction and retention along with positive corporate branding are the key factors for adopting green practices.”

“Green finance” as a new engine to boost green buildings

China also experienced significant progress towards green financing in 2017 thanks to green bonds respectively launched by Longfor Properties, Link REIT and Modern Land. Real estate companies are increasingly utilizing such bonds to finance green projects as they navigate through the ongoing government legislations for the real estate sector including deleveraging.

While international practices in green financing is driving developers, investors, and landlords to engage in sustainable real estate, GRESB (Global Real Estate Sustainability Benchmark), an industry-driven platform committed to ESG (Environmental, Social and Governance) performance assessment is gaining traction in real estate investment market worldwide.  Chinese developers and investors such as CR Land, China Overseas Land, CITIC Capital have all participated in the GRESB program to measure the sustainability performance of their real estate portfolios. CBRE predicts that green finance is expected to become a new growth engine for the sustainable development of China’s economy and green building market.

From Green to Healthy – WELL setting new trends in China 

In recent years, the concept of healthy buildings has been widely promoted and put into practice around the world. The WELL Building Standard, launched in the U.S. in 2014, is the industry’s first performance-based certification system for measuring, certifying and monitoring key features of the built environment that impact human health and wellbeing. The key features are air, water, nourishment, light, fitness, comfort, and mind and are measured against over 100 indicators.

In March of 2015, the Green Business  Certification Inc. (GBCI) and international well building institute (IWBI) launched the WELL certification in China. China is among the first to adopt the WELL standard. Total 104 projects in China have registered for or obtained WELL certification over the past two years. China, as the No. 1 market for WELL system, has over 1 million sq. m space including both pre-certified and certified projects.  

Stephen Tam, Senior Director of Asset Services, CBRE Greater China, said, “Although ‘healthy workplace’ is relatively new in China, awareness as well as demand for workspace wellness is rapidly increasing among business occupiers and employees. As survey findings indicate, 75% of China’s millennials believe that employers should put more thoughts into the work environment. In a market as large as China where public health is placed as one of the top priorities for the government and individuals, opportunities for healthy buildings are vast. We expect that real estate developers and investors in China will capitalize on the new demand and the technical advancements as they look to embrace the future in the healthy buildings sector.”