Is green building a money pit or a lifeline?

With the increasing attention paid to ESG by commercial real estate, CRR has also planned a series of reports for in-depth interpretation—

As early as last November, we used 《Entering the ESG of Commercial Real Estate, Is It Just "Looks Good"?》 to analyze carbon emissions, a key indicator.
In this issue, we will focus on Green Building (GREEN ARCITECHURE) 。
As a key ESG issue of industry concern, "green building" covers the entire life cycle, including design, construction, and operation, involving energy saving, environmental protection, economy, and adaptability. It not only highly conforms to the sustainable development concept of ESG but is also closely related to the quality of human life.
From small window plants to skyscrapers, green buildings are not unattainable but have already formed intricate connections with our lives.

Property's "Green Ticket"

How many do you know?

Looking at the ESG reports of commercial real estate companies, the standards for green building certification are diverse, including China Green Building Standard, LEED certification, WELL certification, EDGE certification, BREEAM rating etc.
What are the commonalities between these standards? What are the differences between commercial buildings with different certifications? We attempt to make it easier for readers to understand by drawing a "medal chart" of green buildings.
 

Comparing domestic and foreign green building standards, most focus on the entire life cycle of the property considering the building's ability to manage resources, its impact on the ecological environment, and the comfort and efficiency of the space; standards with different focuses provide comprehensive and diversified evaluation guidelines for green buildings on the market, maximizing the sustainable development of green buildings.
In recent years, in addition to green buildings, "Zero-carbon buildings" have also been included in the green lists of ESG reports from various companies. So, what are zero-carbon buildings?
Zero-carbon buildings are essentially based on the environmental characteristics of green buildings, constraining the impact of carbon emissions. By introducing key strategies such as net-zero energy, net-zero water, net-zero waste, and net-zero emissions, zero-carbon emissions are achieved throughout the building's life cycle.
Internationally, the leading standard is still the familiar LEED standard LEED Zero provides certification standards for LEED projects worldwide that aim to achieve net-zero goals, including four categories: LEED Zero Water, LEED Zero Energy, LEED Zero Carbon, and LEED Zero Waste.
 

Among the 182 countries and regions participating in LEED certification globally, China is one of the seven countries with LEED Zero projects.
With the launch of zero-carbon buildings and zero-carbon commercial complexes, domestic developers are also accelerating their entry. The "Technical Guidelines for Passive Ultra-Low Energy Consumption Green Buildings" and "Near-Zero Energy Consumption Building Technical Standards", formulated by multiple government departments and institutions, provide standardized support for China's zero-carbon buildings in terms of technology, design, construction, and operation and maintenance.

Are green buildings "environmentally friendly luxury goods"?

Due to the adoption of new technologies, green buildings often lead to increased costs, which has become an obstacle for developers, operators, and even consumers when choosing green building products.
However, equating the "green premium" of buildings with the premium of ordinary commodities is inherently unreasonable.
The green premium essentially represents the transformation costs incurred by enterprises in achieving "carbon neutrality." Behind this cost lies long-term value benefits and forward-looking risk resistance.
From the perspective of the entire life cycle of asset properties, green buildings may increase construction costs during the planning, design, and construction phases, but significantly reduce operating costs in the long-term use process due to continuous resource-saving benefits. The total cost is not necessarily higher than that of traditional buildings.
Let's take a look at how new green building methods achieve efficiency improvements and cost reductions while demonstrating environmental benefits.
 

• "Pre-fabricated" buildings offer better value for money

"Prefabricated buildings" are also known as "prefabricated buildings" or "modular buildings." This is a construction method where the main structures and components of a building are prefabricated in a factory and then transported to the construction site for assembly.
This green construction method, due to its high degree of standardization and scale, performs excellently in terms of cost, efficiency, quality control, and sustainability. The environmentally friendly factors of on-site construction and construction safety also meet the development concepts of ESG from different dimensions, making it favored by many developers.
Currently, companies such as China Resources, Longfor, Vanke, New Town, and China Merchants Shekou have incorporated prefabricated buildings into their key strategies for developing low-carbon green commercial complexes.

*Source: buildsoft.com.au

As of the end of 2023, Longfor Group has applied for 199 prefabricated patents and accumulated 81 patents related to product iteration. Prefabricated product commercial projects have reached 140+ and 18.52 million square meters. In 2024, Longfor's smart construction brand launched its first "6+N" modular product system for multiple business formats.

*Longfor Group's "6+N" prefabricated product system

At the same time, prefabricated buildings also demonstrate efficient "green productivity." Currently, China Merchants Shekou has formed its own low-carbon construction system (LCCS) using ultra-low energy consumption technology, prefabricated buildings, and prefabricated decoration, reducing building carbon emissions throughout the life cycle by more than 50% compared to the 2016 building energy efficiency design standard.
Among them, the low-density green corridor commercial project located in Chengdu Tianfu adopts a steel structure, with an overall assembly rate of 76.3%. Compared with traditional construction projects, the overall project is expected to reduce carbon emissions by 27,100 tons.

*China Merchants Shekou's low-carbon construction LCCS technology system

 

• Passive design, borrowing energy from nature

Unlike active design systems that rely on mechanical intervention, in buildings, passive strategies Utilize the inherent characteristics of the site, reducing energy consumption through physical means such as building orientation, insulation, shape, shading, window-to-wall ratio, and natural ventilation.
This sustainable construction method typically has lower initial investment and, because it does not rely on complex mechanical systems, relatively lower long-term maintenance costs.
In passive design, skylight design is a commonly used technique by architects, utilizing natural light and heat to reduce reliance on artificial lighting and heating.
New World Development's 11 Skies retail center 11 SKIES retail center project, which has obtained WELL Building Standard Gold pre-certification, for example, features innovative electrochromic skylights that improve daylighting and limit the impact of solar heat radiation. This is also the first large-scale commercial application of this technology in Hong Kong.

*New World Development 11 SKIES*

Passive skylight openings can also be part of natural ventilation, playing a "chimney effect" and "wind-drawing effect" to help air circulate inside the building, reducing the need for mechanical ventilation and lowering air conditioning energy consumption.
Longfor Group's Qingdao Sino-German Future City project uses a number of passive window and door designs, including high-performance external insulation systems, high-performance passive external windows, continuous and complete airtight layers, movable external shading, passive inward-opening inward-tilting windows, passive inward-opening doors, fire doors, etc., and uses thermal bridge node processing technology to meet the needs of summer shading and heat insulation while meeting the needs of winter heating and heat preservation, reducing the use of air conditioners and other equipment.
Combined with the management of a highly efficient fresh air system, Sino-German Future City has achieved energy savings and cost reduction with an average annual heating utilization rate of 39% and a maximum monthly heating utilization rate of 100%.

*Longfor Sino-German Ecological Park Future City Commercial Complex Project Rendering*

Guangzhou Panyu Sihai City The architectural design is a bold innovation of traditional commercial spaces. The project is built on a mountain, retaining the original terrain's elevation difference. The overall building form is mainly irregular wavy curves, showing a park-like layout with outdoor spaces and greenery everywhere.
The hundreds of meters of stepped design in the outdoor street area have formed a three-dimensional layered open "canyon" and "basin." On the one hand, it allows the building group's orientation, lighting, and ventilation to make the most of the terrain advantages. On the other hand, it allows shops to have the most open views, organically combining the commercial area, dining area with nature and the outdoors.

*Guangzhou Panyu Sihai City*

 

• Across Cycles, Zero-Carbon Commercial Complexes May Be More "Profitable"

It is said that in the era of "carbon neutrality," zero carbon is the general trend, but "zero-carbon buildings" are still a new term for many people and are easily labeled with high costs and high technological barriers.
In fact, the long-term benefits of zero-carbon buildings are multifaceted.
First, improved energy efficiency can significantly reduce energy consumption and related costs; second, zero-carbon buildings are highly consistent with the ESG environmental concept and the dual-carbon goals, and will receive more financial support from national climate policies and green finance.
For commercial real estate, more importantly, the development of zero-carbon commercial complexes can drive the transformation of enterprise operating costs, create new business opportunities, and demonstrate the enterprise's social responsibility and core competitiveness.
As mentioned earlier, zero-carbon buildings are achieved through key strategies such as net-zero carbon emissions, net-zero energy, net-zero waste, and net-zero water. So what have the projects that have received the "gold sign" in these areas done right? What sustainable benefits have been created behind net-zero?

*Drawn according to LEED Zero certification standards*

China Merchants Shekou Chengdu Tianfu Commercial Complex Project is a pilot park for "zero carbon emissions," and is expected to reduce carbon emissions by 2011 tons per year compared to traditional construction projects.
While focusing on the green and environmental protection of the project construction process, the project also focuses on decarbonization during the operation phase. Various projects in the park comprehensively use efficient machine room technology to improve the energy efficiency level of the refrigeration system. The annual EER target value of all projects is above 5.0. Compared with conventional commercial complexes (EER value around 3.5), it is expected to reduce carbon emissions by 1295 tons annually during the operation phase, and the carbon emissions per unit of GDP are more than 30% lower than similar projects in Chengdu.

*Chengdu Tianfu China Merchants Garden City*

In terms of "net-zero energy" and "ultra-low energy consumption," Swire Properties has a relatively outstanding performance. Seventeen of its properties have passed the Hong Kong "Zero Carbon Ready Building Certification," the largest number among Hong Kong real estate developers. We have also continuously reported on its Guangzhou Taikoo Hui office building sustainable concept.
Among them, Taikoo Place One is the first and only property development project in Hong Kong to receive the Gold rating under the Leadership in Energy and Environmental Design (LEED) Neighborhood Development certification program. By the end of 2023, Taikoo Place's renewable energy generation, including solar energy, biodiesel trigeneration systems, and vertical-axis wind power generation, exceeded 226,000 kilowatt-hours.
Kerry Properties' green management capabilities have been authoritatively recognized in its Shanghai Jing An Kerry Centre —the Jing An Kerry Centre office building has received multiple industry certifications, including China's first LEED Zero Carbon office building certification, Asia's first LEED Zero Carbon & Zero Waste dual certification, and WELL Platinum certification.
Kerry's green operations cover the entire life cycle of commercial properties, coordinating various management departments, streets, tenants, energy-saving and low-carbon environmental protection enterprises, and other stakeholders to ensure continuous investment in energy-saving renovations, photovoltaic installations, green certificate trading, recycling, waste sorting, improving water and air quality, and green publicity.
In terms of waste reduction, Kerry Properties has installed automatically metered sorting bins and food waste bio-processors on each floor, equipped with air purification and wastewater treatment devices. For construction waste, contracts are signed with qualified companies for disposal, allowing the construction waste to be recycled into usable items.

*Shanghai Kerry Center

Is mall greenery just part of the visual merchandising?

When discussing the "green" in green buildings, it's easy to visualize "greenery." Greenery in conventional commercial planning is often categorized as part of visual merchandising, serving an aesthetic and decorative function. However, when applied to green buildings, its significance is far more profound.
This involves a revolutionary urban resilience development model— “Rewilding Cities” Its goal is to enhance biodiversity by restoring natural habitats in cities, including vegetation, water bodies, and terrain, helping to mitigate and adapt to climate impacts, improve residents' health and well-being, and promote collaboration among multiple stakeholders—all key elements of the ESG framework.
In terms of landscape design, Grand Gateway 66 already has relevant standardized requirements, including fully considering the growth habits and ecological competitiveness of plants, planting tall trees in areas away from people to provide habitats for birds and reduce human interference with bird life. At the same time, landscape lighting design requires minimizing interference with the ecological environment and the lives of plants and animals, reducing lighting in nature-friendly areas.
In terms of projects, taking the Hong Kong Taikoo Place which has achieved the highest level of green building and health certification, as an example. In its 2020 reconstruction plan, biodiversity research was conducted, increasing the proportion of outdoor green space at Taikoo Place to 30% of the total property area. Water features, pedestrian walkways, and a variety of native trees and plants create a natural, breathable microclimate in the densely built-up environment of Hong Kong.
 

*Hong Kong Taikoo Place

Compared to the powerful "net-zero carbon" hard technology, the "soft penetration" of greenery in ecological environment and community building is equally impressive.
New World Development To introduce biodiversity into the urban environment, it has opened the Nature Discovery Park at its K11 MUSEA, providing a home for rare local plants, tropical and native plants, and an aquarium.
This project not only conserves local biodiversity but also provides guided tours, workshops, and educational experiences for tenants, customers, and visitors, fostering a sustainable model of human-nature coexistence for commercial projects.
 

*K11 MUSEA's Nature Discovery Park

The more "unpredictable" the climate,

the more "resilient" commercial buildings need to be.

Global climate change has increased the probability and intensity of extreme weather events, directly bringing physical damage and changes in asset value to commercial properties.

“Climate Risk Stress Testing” is part of the financial institution's risk management system and an important tool for real estate companies to achieve ESG goals and maintain business resilience. The purpose of stress testing is to understand how the climate environment of different projects affects their business operations and to make relevant site modifications and operational adjustments for projects with high exposure risks.
Hang Lung Properties provided a detailed analysis of climate risk in its 2023 ESG report. Tianjin Hang Lung Plaza, which was hit by floods and typhoons in 2016 and 2018, is exposed to a high risk of flooding. The property has implemented a number of climate adaptation measures, such as installing high-efficiency water pumps, auxiliary equipment, and water retention basins, and cooperating with government departments to widen the water pipes around the property. In subsequent years, even during heavy rains, the property has been able to effectively control increased rainfall.

*Tianjin Hang Lung Plaza

Swire Properties The latest climate risk assessment shows that the risk level of the global property portfolio is low to moderate, indicating relatively strong adaptability. This is also due to Taikoo's continuous adjustments to adaptive design, including updating project design criteria for extreme heat and relative humidity, cooling loads, and flood resistance, and reserving capacity to improve defense levels.

 

• The ideal destination for business is inseparable from WELL-being.

Unlike other green building standards, WELL pays more attention to indoor environmental factors, including comfort, health, air, water, and light, focusing on exploring the relationship between buildings and the health of their occupants. In the 2023 ESG reports, "obtaining WELL health building certification" has been included in the green building goals of most commercial real estate companies.
At the same time, operational measures to address health crises are also being upgraded. The WELL Health-Safety Rating (WELL HSR) applies to all types of properties globally. According to this standard, appropriate operational management policies, maintenance management systems, interaction with building users, and the development and implementation of contingency plans are adopted.
As of 2023, Hang Lung Properties has received the WELL Health-Safety Rating for 19 properties in eight cities across Hong Kong and mainland China, providing strong measures to protect the health and safety of visitors.
Such as Kunming Hang Lung Plaza installing a medical-grade ventilation system with ultraviolet disinfection to improve indoor air quality.
*Kunming Hang Lung Plaza
Wuhan Hang Lung Plaza installed indoor air quality monitors to monitor indoor air quality levels in real time. In addition, Hang Lung regularly reviews its emergency preparedness plan to ensure that it is capable of providing a more comprehensive response to the next wave of epidemics or flu outbreaks.

*Wuhan Hang Lung Plaza

Who are the advancing green builders?

In addition to the value of green buildings in cost savings, community building, resilience improvement, and health and well-being mentioned above, the benefits they bring to enterprises go beyond this. The reason why green buildings have become one of the most important substantive issues in the real estate industry's ESG reports is also due to the economic benefits they create and Market Value 。
With the increasing demand from brand tenants for green building certifications in leased projects, green certified projects have created higher occupancy rates and lower vacancy rates. Authoritative agency research data shows that projects with green building certifications have a vacancy rate 4% lower than non-certified projects ； and rents are also 10%~13.3% higher. 。
At the same time, because green certified projects are easier to obtain preferential financing from financial institutions, and multiple financing channels including green bonds and green insurance, using green construction to open up the "green finance" chain has become an important means for the real estate industry to break through funding bottlenecks.
Regarding policy and land resources, under the premise that local governments actively encourage the development of green buildings, green certified projects will receive preferential treatment in terms of policy, land, and taxes.
Among the leading commercial real estate developers, who are these aggressive green builders?
 

On the path of green building certification, we see that most leading companies have been deeply involved for many years, such as Kerry Properties' green building certification projects have reached 91%, Hang Lung Properties green building area has reached more than 80%.
In the past three years, companies have also shown an accelerated development trend in the development of green construction, such as New Town Holdings has added multiple certifications in three years, including 42 national green building label projects and 12 LEED certified projects.
Under the leadership of benchmark enterprises, the number of green buildings in China is expected to continue to grow, from local to national, from individual buildings to urban areas. Looking to the future, we hope that green construction can be expanded to the scale of urban integration and development.

In closing
Under the ESG framework, there is much more that commercial real estate can do—
Just focusing on "green buildings", there are also diverse transformation opportunities, creating sustainable cost-effectiveness, cultivating an organic ecosystem of co-existence between nature and community, allowing enterprises to grow with the environment and society during adversity.

Focusing on the present is valuable, but seeing the future is equally important. Green buildings are not just the bricks and mortar before us, but a bridge to the future.