Green building represents one of the most significant opportunities for sustainable growth at both the national and global levels, and local developers have begun paying more attention to this concept. The fledgling segment has great development potential as locals increasingly look for better living quality.
Introduced in 1990 and becoming truly popular in 2002 with the establishment of the World Green Building Council, green building, or sustainable construction, has transformed the whole construction industry. Taking its first baby steps in 2007, the Vietnamese green building market is still in its initial stages of development.
According to Hang Phan, chairman of the Vietnam Green Building Council (VGBC), over the past decade, Vietnam’s cities have been gradually becoming greener, but there is still a long way to go and many obstacles to overcome.
“There has been a massive increase in construction works. To raise the demand for green building, we will require not only awareness but an accurate understanding of the costs and benefits of green buildings, as well as the government to move towards encouraging green building development through incentives and green building codes,” said Hang.
In 2010, the VGBC introduced LOTUS, the first green building rating system tailored for Vietnam’s building regulations, climate conditions, and construction practices. Now LOTUS contains many systems that cover most building types, including non-residential, multi-family residential, existing buildings, single-family homes, small buildings, and interior fit-out projects. LOTUS serves as a framework and a planning tool to create healthy, environmentally friendly, and cost-saving buildings.
Dang Thanh Long, executive director of the VGBC, cited estimates that buildings account for around 35-40 per cent of the final energy consumption in Vietnam.
“If all buildings become 25 per cent more energy efficient, we would be paying lower bills every month, our companies would become more profitable, we would have to build fewer coal power plants, and we could all enjoy cleaner air and a healthier environment,” Long said.
Achieving a 25 per cent energy saving compared to a code-compliant building does not require buying advanced and expensive technologies and equipment. Instead, it can be achieved within the normal budget via design principles combined with a more collaborative, integrative project delivery model. “By using integrative design, green building represents one of the most significant opportunities for sustainable growth at a global level, and even more so in developing, budget-limited countries like Vietnam,” Long said.
According to the International Finance Corporation (IFC), a member of the World Bank Group, green building would bring about many benefits for developers. It is a cost-effective solution and has a distinct appreciation among investors. Being green is one of the key factors behind developers rising up to become market leaders.
Vu Hong Phong, green building specialist from the IFC, said that previously, the top reasons to construct a green building were mainly the corporate social responsibility programmes of companies, a high recognition in the market, and lower operation costs. Examples include Big C Vietnam, Taekwang Vina, Intel Corporation, Coca-Cola Vietnam, and Pou Chens.
“That explains why most green building owners are foreign companies, with a clear vision of green building benefits. Additionally, some constraints were also persistent and restrained the development of green buildings,” Phong said.
A lack of stakeholder awareness, essentially the mistaken perception of green building costs and sustainability concepts was one of the crucial causes. Investors used to think that green buildings required 20-30 per cent additional costs to initial investment, while the reputation of green buildings was tarnished by marketing campaigns “greenwashing” projects with unclear information about resource efficiency, occupant wellness, and impact on the environment.
“Moreover, there are no clear benchmark and mandatory building codes, resulting in only a little impact on the market and the construction industry. Professional builders do not possess enough experience, skills, and understanding of green building design, making implementation difficult,” Phong explained.
In order to easily export products and target new markets with stricter criteria such as North America and Europe, some companies have chosen to “green out” their factories, such as Bel Greenfield Asean, Deutsche Bekleidungswerke Ltd.’s factory in the Mekong Delta province of Long An, and establish resource-efficient production chains, proving their commitment to sustainability and environmentally friendly products. The Independence Place in Ho Chi Minh City, which became gold-certified in Leadership in Energy and Environmental Design (LEED) standards in 2012, has been using its green building certification to achieve nearly 80 per cent occupancy within a year after it was completed, drawing in multinational giants like Microsoft, Starbucks, and Sony.
Enticing users and buyers
According to Phong from the IFC, in 2019, the situation has changed. The top reasons to go green in Vietnam are to provide certified green real estate products to end users and homebuyers, as well as differentiate products from the rest of the market. Local developers, especially in the residential segment, are now joining the green movement, like Vihajico, Vietnam Ciputra (high- and mid-income apartments), Tien Phat Corporation, EZ Land (mid-income), Capital House, and HUDLand (mid-income to affordable apartments).
Moreover, Capital House has won the Financial Times/IFC Award in the “Achievement in Transformational Infrastructure: Green Building” category with the EcoHome Phuc Loi EDGE Certified project, demonstrating that green buildings can be made with little incremental cost while securing multiple benefits.
According to the VGBC, the market has probably adapted to new requirements in the new LEED system. However, the gross floor area (GFA) registrations in the past two years were very low compared to the 2015-2016 period.
Indeed, the average of new LEED projects during 2017-2018 was only 4,932 square metres, while it was 17,700 square metres during 2015-2016. The 2015-2018 period has established a new level of adoption for LEED in Vietnam. There were no fewer than 20 new projects in any single year, while none of the eight years before that recorded 10 new projects or more.
“We expect that LEED activities will stay robust in the next few years,” Long said.
Like LEED, LOTUS has also achieved new heights in the past two years, totalling 31 new registrations, compared to a total of 20 projects registered during the seven years before that. However, the growth in GFA was lower than the growth in the number of new projects, indicating that many new projects were relatively small.
Although both LEED and LOTUS have achieved impressive growth in the recent construction boom, the motivation for their respective growth might not be entirely similar.
Of the 135 newly-registered LEED projects during 2015-2018, industrial and office property alone accounted for 75 per cent of projects and 80 per cent of total GFA.
The past four years have seen the broader adoption of green buildings in the Vietnamese construction industry, coincident with one great construction boom in the country.
According to Nguyen Trong Thuc, senior manager, research and consulting services of real estate consultancy CBRE Vietnam, as the real estate market in Vietnam progresses, there is a growing demand for more efficient buildings, thus the adoption of green building certifications is expected to increase in the future.