Vietnam commercial real estate goes green: Knight Frank

Vietnam’s commercial realty sector is rapidly embracing environmental measures and certifications in the construction of new buildings and retrofitting existing buildings to meet multinational tenants’ demands, property consultancy Knight Frank said Wednesday.

A new Knight Frank study, which drew upon green building databases from the Asia-Pacific region (APAC), showed that Vietnam has trailed its APAC neighbors in terms of Tier 1 and Tier 2 certifications for its office space, and all signs indicate rapid adoption of the green measures in the years to come.

The changes are in line with a series of governmental directives and growing corporate and public consciousness about sustainability, the global consultancy noted.

“This has been on the national agenda since the first Energy Efficiency Building Code was published in 2005,” said Knight Frank Vietnam CEO Alex Crane. “However, multinational tenants’ mandating environmental certifications have proven the key commercial driver for building owners to embrace the green wave.”

Vietnamese developers have tended to favor LEED and Green Mark certifications for their Grade A and B office buildings, according to the study. In Ho Chi Minh City alone, there are seven LEED-accredited buildings and two Green Mark-accredited buildings with varying degrees of rating, and Hanoi has three LEED-accredited buildings.

Both HCMC and Hanoi are still quite behind when compared to Bangkok, which has up to 25 LEED-accredited office buildings of various ratings.

“We expect to see this trend continuing in existing and future pipelines, from green fit-outs from multinationals to retrofitting a whole building to attain green accreditation like Me Linh Point’s recent Green Mark Platinum renovation in Ho Chi Minh City,” Crane said.

Leadership in Energy and Environmental Design (LEED) is a certification program developed by the U.S. Meanwhile, the Green Mark certification scheme is a system by Singapore’s Building and Construction Authority, shortly known as BCA.

The initial investment for green buildings is typically 2-5% higher than equivalent non-certified projects. Vietnamese green building consultancy GreenViet has found that within five years of operation, the buildings will have been repaid the additional construction costs.

This aligns with Knight Frank Vietnam’s findings, as the firm has been tracking rental premiums in central business districts for green buildings. The rentals were up to 16% maximally higher compared with non-green buildings in the third quarter of 2022.

The CEO of Knight Frank Vietnam stressed, “In the future, projects that want to be considered for Grade A will need green accreditation as occupiers are becoming more aware of rating scores to satisfy their sustainability initiatives and ultimately lower their carbon footprint.”