So-called green – or energy efficient – buildings are increasingly using certifications such as those issued under the US Green Building Council’s (USGBC) Leadership in Energy & Environmental Design (LEED) rating system to enhance their appeal to prospective buyers or tenants.

“With the rapid advancements in technology, the improvement of mechanical and electrical equipment from one generation to the next, and the application of many new technologies, we can now achieve more energy savings, greater environmental protection, and better operating and maintenance standards,” said Alkin Kwong, CEO of Hong Yip Holdings, a subsidiary of the developer that manages its real estate portfolio, including the Sun Hung Kai Centre.

In August 2022, the centre became the oldest building in Hong Kong to receive the platinum certification from the USGBC’s LEED rating system, under the existing buildings category.

“All landlords are aware and actions are gaining momentum quickly,” said Andrew Lau, director of ESG (environmental, social and governance) advisory in Asia at property consultant Colliers. “In future, if a building has no green building certification or such a design in the base building provision, it will lose market share.”

Hong Kong’s old buildings still have green potential

“All the MNC [multinational corporations] or major companies … already demand [green-certified office space] as a basic requirement,” said Lau, while highlighting that total net floor area of environmentally-certified office buildings in Hong Kong had risen to 31.6 million sq ft, which was 39.3 per cent of total office stock as of March 2023. Colliers considers environmentally certified buildings as those carrying bronze, silver, gold or platinum certifications under the Building Environmental Assessment Method (BEAM) Plus, an assessment system tailored for buildings in Hong Kong, or those with a LEED rating.

“This will slowly [permeate] into the local market because Hong Kong is also driving its carbon neutrality agenda and pushing all the public companies to disclose their carbon emissions. It’s just a matter of time.”

For companies committed to carbon neutrality by a specific date, calculations need to account for greenhouse gas emissions from their overseas offices as well, said Cary Chan, the executive director of Hong Kong Green Building Council (HKGBC), a not-for-profit public body which promotes the standards and development of sustainable buildings in Hong Kong.

“A lot of tenants may be international organisations or listed companies that need to report on their ESG performance as well. They need the building to be green and have low carbon-intensity, and a developer that is environmentally conscious. These are some of the major factors driving the developers and building owners to retrofitting.”

“All listed companies [in Hong Kong] need to disclose their ESG performance, so they need to improve every year. Retrofitting can be a good one because they can show the energy savings within their ESG report.”

“Environmentally certified buildings can increase the occupancy rate or the value of the building,” said Chan.

Certified buildings outperformed in terms of vacancy, with 79 per cent below their district average as of July 2022, according to Colliers’ Embracing ESG report in September.

“In Hong Kong, within the same office submarket, green-certified offices seem to have outperformed those buildings without such credentials.”

Most new grade A office buildings in Hong Kong typically possess at least one green building certification to stay competitive and attract tenants, according to Cushman.

“While ESG credentials may be more capex (capital expenditure) intensive initially, the eventual benefits such as energy saving, compliance with global ESG standards, and alignment with any potential green-related government incentives is driving developers to integrate ESG as an essential element in the development process,” Cushman said in its “Rising Tides of ESG” report in December.

“With the current high levels of availability in Hong Kong’s office sector, occupiers are presented with more options and are likely to choose green-certified buildings assuming the cost is similar.”

“We believe ageing office buildings will eventually become obsolete in the market if they do not upgrade themselves to fulfil emerging sustainability needs.”

Around 380 solar panels were installed at Sino’s Skyline Tower in Kowloon Bay, which has helped to generate more than 210,000 kWh of renewable energy since 2019. Solar panels will play a key role in helping the developer achieve its target of generating 6 million kWh of renewable energy by 2030.

Skyline Tower’s renewable energy system cost HK$2.4 million and will help to achieve energy savings of around 93,480 kWh per year, with an estimated payback period of around 5.8 years, according to HKGBC’s case study on the building.

“There is a lot of supply of offices in Kowloon Bay, so we need to find ways to stay competitive,” said Chhoa. Retrofits and installing green features would help Sino Group maintain a competitive edge, she said.

“With the growing significance of ESG issues, more MNCs and listed companies have incorporated relevant ESG goals when developing corporate strategies and have taken sustainability into consideration in their daily operations,” said Chhoa. “A sustainable working environment is necessary to further achieve corporate targets to reduce energy consumption and greenhouse gases, as well as for the performance of green practices.”

Office space with better energy efficiency and sustainability performance plays a significant role in helping to meet climate targets, said Nick Tang Ho-hong, CEO of Wang On Properties (WOP) which is also a tenant of Skyline Tower.

“WOP has an ESG road map which includes reducing its carbon footprint and being environmentally responsible. By choosing office space that is designed to be energy efficient and sustainable, we can reduce our carbon footprint and contribute to global efforts to mitigate climate change.”

“Holistically embedding ESG into Champion REIT’s properties, from green amenities to wellness initiatives, bolsters our sustainable competitive advantages,” said CEO Christina Hau.

“The high occupancy rate of The Quayside is a testament to the growing demand for sustainable buildings,” said Wong, who pointed out that the 23-storey building was 98.2 per cent occupied as of October 5, compared to Cushman’s 22.1 per cent average vacancy rate for grade A offices in the same district during the third quarter.

“We believe that quality buildings attract quality tenants and buyers, and sustainability is part of developing that quality product,” said Douglas Wu, executive director of real estate operator Fairland Holdings, speaking at a panel organised by Undivided Ventures last month.