Green office space expensive

Published on Tuesday, 27 November 2012 00:00
Written by ALBERT CASTRO
Malaya Business News Online - Philippine Business News | Online News Philippines 
Green buildings go for a premium.  In San Juan City, office spaces certified as part of green  edifice, are rented at 15 per cent per square meter higher than ordinary rooms.

Property trader and analyst CB Richard Ellis (CBRE) declined to reveal that actual asking rate for the newly-unveiled BTTC Center building but  contrasted to the Greenhills’ neighboring central business district (CBD), it would mean an upside to the  Ortigas CBD’s average asking rate of P563 per square meter,

Joanie Mitchell, CBRE director, said the 12-storey BTTC Center is PEZA-accredited office space building that has been pre-certified under the Leadership in Energy and Environment Design green building of the US Green Building Council and is one of the six fully-constructed buildings in the Philippines so far.

“We have six that had been certified and 48 more  that are set to go online,” said Mitchell.

“This is the first office building of its kind in the area, given that Greenhills is predominated by commercial spaces. This is 15 percent higher but then again we have nothing to compare it with,” added Mitchell.

The BTTC Building is the second green building to be marketed by CBRE, after the 33-storey Zuellig Building in Makati which is currently 50 percent occupied.       

Occupancy

BTTC is now  20 percent occupied.  The   company continues to service potential tenants of office space particularly business process outsourcing.

CBRE in a recent briefing said the office space segment of the property market continue to benefit from the improving economic condition with tenants moving to Prime and Grade A buildings from lower quality offices with the CBD and its fringes.

For the year, lease transactions are estimated to reach 450,000 square meters. The other green building in the Philippines include Texas Instruments (LEED silver for New Construction), Shell Shared Services Makati (LEED Commercial Interiors Silver), ADB HQ (LEED EBOM), Sun Life Centre Taguig (LEED Core & Shell Gold), Nuvali Evotech One (LEED Core & Shell Silver), and Net Lima (BERDE).

Mitchell said that the coming online of green buildings will make compliance by multinational companies with green building much easier.

The appreciation for Green building in the Philippines is slowly taking root as supply come online, which only a year ago had observers saying it has yet to reach a point where developers can demand for a premium from its locators.    

Study

CBRE in a 2009 study noted that the drive for adoption of green buildings is due to “convergence of public sentiment, legislative pressure and technological advances” that supports its sustainability.

“The desire to be ‘green,’ or to be perceived as such, is increasingly motivating the behavior of some companies,” it said.

With construction of  buildings contributing to carbon emissions, the real estate sector “is in the forefront of this shift, with much of the focus on operational energy efficiency and sustainability development,” it added.

The challenge though is in convincing investors and developers that “adopting green practices” makes “good commercial sense.”

“Specifically, developers who incur the additional cost of developing green buildings need to be rewarded for doing so,” CBRE said, noting that a “more basic” level of certification may raise costs by 2-3 percent for new constructions, while a “greener” building --- designed to achieve one of the higher standards --- is likely to add between 5 percent to 7.5 percent to construction cost.

Investors then will look for higher yield from their investments which should come in the form of rent premium, lower interest in the financial market, or lower premium for insurance applications for a green building, since it is “increasingly seen as ‘future-proofed’ investments,” it added.

Study

In a recent study by CBRE Global Network, it was revealed that while development of green spaces may entail additional cost at the onset, the investment is “recoverable and is expected in the long run through decreased operating costs, increased ROI through higher tenant/customer retention and renewal, rental premium, and increased building/asset value.”

“Developers are thus becoming much keener meeting these demands and are seen to be more willing to incorporate ‘green’ features into their buildings, making them cheaper to occupy.

This is made possible by technological advances, making it easier and cheaper to build sustainable buildings,” it said.

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