China’s Green Building Development Goes on Fast Tracks; Beijing and Shanghai Surpass Major Cities in Green Space Rollout

CBRE Publishes White Paper New Era of China’s Green Buildings

June 16, 2015, Beijing - As environmental issues have increasingly become a pressing concern and economic development is shifting towards sustainability, green buildings in China are starting to get active support from the government.

Currently, two rating systems, i.e. China’s national Green Building Evaluation Standard (GBES) and LEED by U.S. Green Building Council, have both been adopted to evaluate green buildings in China. By April 2015, China has achieved total 320 million square meters of green building space (certified by both rating systems)154 times higher than the gross square meters in 2008 when GBES was initially launched. 

China’s green building sector has stepped onto fast track towards large-scale development. According to CBRE’s recently published white paper “New Era of China’s Green Buildings”, Beijing and Shanghai, each with nearly 20 million square meters of green building space, both took the top 2 spots in the rankings of global green buildings, surpassing other metropolitans such as Chicago, New York and Washington. China’s Shenzhen and Wuhan were also among the top 10 cities on the list. The white paper also suggested that first-tier cities such as Beijing and Shanghai, where the concept of green buildings was introduced earlier, have begun to harvest economic benefits from green buildings.

Gre​en buildings are cost-effectiveness, reducing operating costs and creating higher property value
As the concept of being environmentally friendly stays firm for the government, businesses and individuals, “going green” has increasingly become an important element in CSR and employee engagement programs for both MNCs and domestic companies. As a result, green building certifications are enabling real estate projects, especially commercial properties, to differentiate from their counterparts in the market. Space that is “green” certified can help landlords attract quality tenants, as it can provide a comfortable and healthy workplace for its employees and improve their productivity.

In terms of rent level and occupancy rate, green buildings also offer unique advantages. In the white paper, LEED-certified Grade A office buildings in Beijing, Shanghai, Guangzhou, Shenzhen and Chengdu, were compared against projects without green certifications on rental and occupancy. The findings indicated that the average office rent of LEED-certified space in these cities all recorded a premium between 1.5%-25.7%. The research also suggested that LEED-certified projects were proven to be more resilient when the market goes down. Frank Chen, Executive Director and Head of CBRE Research, China, commented: “In Beijing and Shanghai, where the LEED concept was introduced earlier and where the office sector boasts a larger stock of LEED-certified projects, green building certification is better recognized and accepted in the market. LEED-certified Grade A office buildings generally outperform non-LEED projects in many ways such as absolute rent, rental index and occupancy rate, and these are key indicators closely linked to returns of property investment. The economic benefits of green buildings have already been positively realized in these relatively mature markets.”

Cost is a critical consideration for developers in their decision-making process. However, extra costs incurred from green buildings are not as high as people thought. Projects deployed under GBES are only 0.8% - 6.1% more than non-GBES buildings. The incremental investment primarily covers seven aspects including outdoor construction, optimization of enclosure structures, utilization of renewable resources, cold and heat storage facilities, the use of non-traditional water sources, indoor environment control and intelligent systems. According to property sustainability cases from CBRE’s Asset Services division, with the early involvement of green building advisory panel, there is hardly any extra hardware investment for new buildings to achieve LEED Gold certification if they are designed in compliance with national GBES. If these projects aspire to get LEED Platinum certified, the extra cost would only be 2% more. Based on CBRE’s previous experience, the cost increase can soon be absorbed by operational cost savings from technology upgrades.

Stephen Tam, Senior Director of Asset Services, CBRE China, commented:“ Early involvement of professional advisors is very important in terms of cost control for green buildings. The strength of the advisory team lies in its ability to provide customized solutions that cover the entire life cycle of the projects. This will ensure that the most cost-effective approach is adopted for the projects. In addition, the advisory services will also be able to help less-experienced developers leverage and optimize their legacy technologies and facilities so as to generate the best possible returns from the investment. In this evolving market where green property management is not yet established, we constantly see examples of businesses who suffer from operational in-efficiency and massive capital loss as they excessively introduce non-effective technologies and hardware upgrades instead of focusing on overall planning and management.”

With the emergence, advancement and adoption of green technologies, products and construction techniques, developers will be able to choose more viable green solutions with the assistance of the expert teams and advisory firms. Driven by growing market demand and supportive measures by the government, CBRE believes that green buildings promise good outlook as a truly cost-effective investment.  

Long way to go: China’s average green space per capita is still far behind US 
Although China performs well in major cities in rankings with US peers, average green space per capita in China is still far behind US. CBRE’s study shows that Shenzhen took the first spot among Chinese cities with 1.31 sqm of green space per capita; however, it was only the 20th on the global list. Whereas in the U.S., green certified space per capita is 1 square meter, and in some cities, the number can be as high as 10-20 square meters. In comparison, except for Shenzhen, all other Chinese cities own less than 1 square meter of green space per capita, and Shenyang, as a 2nd-tier city, has even lower rate, standing at only 0.2 sqm per capita. 

According to a survey conducted by the National Bureau of Statistics, the floor area of new buildings constructed during the period of 1995 to 2013 in China totaled 43.4 billion square meters. Based on this data, to date, the estimated gross floor area of existing buildings in China has exceeded 40 billion square meters. Only less than 1% of these buildings can meet green building standards. Meanwhile, new constructions in China are growing rapidly, at the rate of 1 billion square meters per year. The tremendous amount of constructions represents a huge challenge as well as opportunities in raising overall energy efficiency in China. However, policy effectiveness and evaluation processes for green buildings still fall short in China. With the “Standard for Green Performance Assessment of Existing Building Retrofitting” being submitted for approval in 2014, we believe that green transformation of existing buildings will gradually be placed on the government’s agenda.

Figure 1. Total green space rankings among major cities in China and U.S. (1-20)
 
Data sources: CBRE Research, The U.S. Green Building Council (USGBC), 
China's Ministry of Housing and Urban-Rural Development (Q2 2015) 

Figure 2. Green space per capita in China’s major cities

Data sources: CBRE Research, The U.S. Green Building Council (USGBC),
China's Ministry of Housing and Urban-Rural Development (Q2 2015) 

Stephen Tam commented:“China’s green building industry will embrace unprecedented opportunities as urbanization continues. The green building sector will further expand from developed regions to the whole nation, from residential to commercial projects, from new constructions to existing buildings, from ‘green marketing’ campaigns to the entire life cycle of the properties. The related policy measures and standards implemented in the sector will also evolve towards a more market-oriented direction with more flexibility and sophistication.”

​​​

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 (based on 2016 revenue). The company has more than 75,000 employees (excluding affiliates), and serves real estate investors and occupiers through approximately 450 offices (excluding affiliates) worldwide. CBRE offers a broad range of integrated services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at www.cbre.com.​

 ​​​