June 12, 2014, Beijing – Shenyang Friendship Times Plaza in the city of Shenyang obtained pre-certification from the US Green Building Council (USGBC) for a LEED Gold rating in May. The project is the first development in Shenyang that CBRE is helping to move through the LEED certification process this year. The agency is also helping developers obtain LEED certification for buildings in Shanghai, Guangzhou and Shenzhen.
Stephen Tam, Senior Director of Asset Services, CBRE China, said, “Green certification for office buildings is increasingly seen as a desirable characteristic by corporate occupiers, and strong demand for green certification among these occupiers is encouraging developers to not only build high-quality office buildings, but to even see green certification as a necessary part of their projects. The phenomenon is gradually expanding from the first-tier cities to second- and third-tier cities.”
Increasing numbers of foreign enterprises prefer office buildings with green certification, and an office in a LEED-certified building has become a site selection requirement for many transnational companies, especially Fortune 500 enterprises. In many US states, LEED certification has become a statutory standard.
Green certification effectively increases office building competitiveness
According to CBRE's China Real Estate Market Q1 2014 Review, the first quarter of 2014 saw 1,265,000 sqm of new high-quality office space supply enter the market. Although this figure represented a slowdown in the rate of increase of new supply, the new supply still caused a rise in vacancy rates in most cities. Meanwhile, the launches of some projects in Shanghai and Shenzhen were postponed until next year, and this will increase upward pressure on vacancy rates in these cities during 2015.
Under such circumstances, competition in the office building market becomes increasingly intense. While the market has always favored buildings with favorable fundamentals — good location, robust infrastructure, low rent — there is now increasing demand for office space in buildings built to high quality standards. Among these high quality buildings, those that have green certification in particular are enjoying rising demand due to the benefit they bring to the environment, society and economy.
Currently, many countries have formulated their own green building certification standards, but LEED is the most mature and widely accepted. Among the green building certification projects that CBRE has completed in China, LEED projects number the most. Buildings that achieve LEED Gold rating generally use 25% less energy and produce 34% less greenhouse gases than the average building. From the perspective of the property owner, the energy savings bring tangible economic benefits.
Higher demand in second and third-tier cities
Rapid economic growth in middle and western regions has been increasing demand for office space in many second and third-tier cities. However, an excess of new project launches has driven up vacancy rates in many of these cities, to the extent that they have surpassed vacancy rates in the first-tier cities. The situation is expected to persist for some time.
Despite the overabundance of general office space supply in second and third tier cities, however, the supply of high-quality office space in these cities is still low. Transnational companies and large domestic enterprises entering the second and third tier cities prefer high-quality office buildings with international property management standards, and green certification is one of their standards for assessment.
"In the project promotion process, LEED certification is what won the attention and recognition of many of our clients," said Chen Hao, general manager of Shenyang Xingshi Real Estate Development, the developer of Shenyang Friendship Times Plaza. "This is our competitive advantage in the Shenyang market, and we believe this competitive advantage will last into the years ahead. Our project will continue to be greener, more efficient, and more advanced than other developments in the city."
Presently there are 430 LEED projects in China that have been registered with the US Green Building Council. They are concentrated most densely in the first tier cities of Shanghai, Beijing and Shenzhen, but more than 300 LEED projects are located in second and third tier cities such as Hangzhou, Chengdu, Chongqing, Suzhou, Wuhan, Zhuhai, Changzhou, etc.
Occupier demands guide office building development
From the occupier's perspective, a green certification enhances corporate image, but its positive effect on employee’s wellbeing is perceived as even more important, as this brings direct benefits to the enterprise. A green work environment improves the health of employees and thereby boosts their efficiency. If an enterprise has 1,000 employees who make a daily salary of 300 RMB, then a green work environment that reduces sick days by 2.88 per year for each worker (the average reduction according to USGBC) will generate more than RMB 860,000 yuan for the enterprise each year.
The office building market is now a buyer’s market. Guided by the demands and interests of occupiers, many developers now make green certification a key part of their enterprise development strategy and apply for green certification for all their new projects. They believe this will help them attract not just more occupiers, but higher-quality occupiers as well.
Sean Lim, Senior Director and Head of Office Services, Eastern China, and Head of Landlord Services, China, stated, “Whether it is intelligent management or customization, sustainable design will be an essential feature of the hardware and software of future office buildings. Office buildings that have green certification undoubtedly take the lead in this respect. We believe that there will be more green office buildings in cities throughout China.”
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 2014 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.
