Green office and thirst for supply in Hanoi

The Importance of ESG in the Vietnamese Real Estate Market

According to the United Nations Environment Programme, as of 2020, construction activities accounted for approximately 31% of global final energy consumption and 28% of CO2 emissions. Recognizing the pivotal role of real estate in combating climate change, real estate businesses in the Asia-Pacific region are increasingly prioritizing ESG (Environmental, Social, and Governance) considerations.

At the 26th UN Climate Change Conference of the Parties (COP26), many countries committed to achieving net-zero emissions by 2050. European and North American countries are leading the race to reduce emissions, with about 38% of cities making commitments. In contrast, only 18% of cities in Latin America, 17% in Sub-Saharan Africa, 14% in Asia-Pacific, and 4% in the Middle East and North Africa have committed to this target.

Vietnam has pledged to achieve net-zero emissions by 2050. To fulfill this commitment, various policies have been implemented to review and adjust relevant strategies, plans, and regulations.

As of now, in Vietnam, according to Savills' Q3/2023 Market Overview report, 85% of companies classified as the fastest-growing businesses in Vietnam are actively engaging in ESG commitments.

PwC's "Readiness to Implement ESG in Vietnam 2022" report emphasizes that 80% of surveyed companies plan to commit to ESG within the next 2-4 years. Foreign Direct Investment (FDI) companies and private/family enterprises are at the forefront of ESG implementation, reflecting the increasing sense of responsibility among Vietnamese businesses. This trend is driving a surge in demand for office spaces that meet green standards.

Mark Ridley, CEO of Savills Group, notes the positive financial evidence supporting ESG adoption. As ESG compliance is closely monitored and implemented by companies, tenants and investors increasingly prefer and prioritize green buildings. This could pose a risk of higher vacancy rates for buildings that do not meet these standards.

In a recent survey by the Urban Land Institute and PwC, 37% of respondents stated that ESG factors are now mandatory considerations in real estate investment decisions, up from 22% in 2021.

Demand for offices that meet ESG commitments is high in the Hanoi market

While there is a recognized demand for green offices, the supply of green office spaces in the Hanoi market, in particular, remains low. Savills' ESG Spotlight report indicates progress in green building certifications in Vietnam, with 20 office buildings nationwide holding LEED or Green Mark certifications. Among them, only three projects in Hanoi meet international green building standards: Capital Place (LEED Gold), TechnoPark (LEED Platinum), and Taisei Square Hanoi (LEED).

TechnoPark in Hanoi is currently the only project with LEED Platinum certification. To achieve this certification, TechnoPark surpassed strict criteria across nine aspects from design to operation, including integrated design, location and connectivity, sustainable location, efficient water, energy and air use, environmentally friendly materials, and assured air quality. TechnoPark can save up to 17.4% of annual energy consumption compared to the standard by using Low-E thermal glass on the building's exterior and a modern underground ventilation system to reduce heat transfer. Additionally, over 75% of the working space in TechnoPark is designed to receive natural light, minimizing indoor energy consumption. The building also focuses on developing green spaces, with 25% of the total building area dedicated to outdoor gardens, not only providing natural spaces but also creating a healthy environment for all employees. In terms of energy optimization solutions, the application of artificial intelligence (AI) in Access Control, Car Parking, and CCTV systems is a rare advantage that few LEED projects in Vietnam possess.

In response to the increasing demand for green offices, projects with prestigious LEED certifications that meet international standards have become attractive models, generating growing interest from businesses. This trend is a driving force for the sustainable development of the real estate market in Hanoi and Vietnam as a whole. It is expected that by 2025, the Hanoi market will receive an additional 68,400 square meters of green office space in addition to the existing supply.

Source: Báo Điện tử - Đảng Cộng sản Việt Nam

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