Vietnam has the opportunity to become a leading country in the field of sustainable development of green office buildings
Vietnam holds a significant opportunity to become a leader in the field of sustainable development of green office buildings. The trend of globalization and regional economic integration is opening up many new opportunities for the development of the office real estate market, specifically the office sector in Vietnam. Along with that, the increasing demand for modern, smart and environmentally friendly workspaces also makes green standards an essential trend.
Therefore, Vietnam has the entire capacity and potential to develop green office buildings, contributing to building the image of a civilized, modern and environmentally friendly country. It’s time for Vietnam to make a breakthrough and become a pioneer in this key field.
Global demand for green office building rentals
The global demand for green office buildings is increasing
Based on Savills’ Global Prime Office Market Report for the third quarter of 2023, the average rental costs for premium offices around the world continue to increase, with actual rental prices in markets recording a 0.8% growth in the third quarter of 2023. This upward trend is largely influenced by the rise in finishing costs and other associated expenses. On average, global finishing costs have increased by 3.2%, with the highest increase recorded in the United States. Additionally, the average gross rental prices also increased by 0.9% in the quarter as tenants continued to prefer premium office spaces.
In the United States, the office market continues to witness an increase in prices and vacancy rates, with the average vacancy rate rising by 90 basis points since the end of 2022. Despite high finishing costs nationwide, promotional programs and incentives from investors have led to actual rents (rental prices after deducting incentives) decreasing by 0.7% in the third quarter of 2023. In contrast, in Miami, the market recorded strong demand and limited new supply, resulting in prices increasing by 10.7% in the same period. Here, office finishing costs also rise due to material and labor shortages in South Florida. On average, gross rent in the North American market increased by 0.5% over the past 6 months for premium office projects.
Average rent for premium offices around the world continues to increase
Tenant demand in Europe is also driven by service companies, partially offsetting the decline in demand from information technology businesses. Therefore, the vacancy rate remains at a stable level. In the EMEA region (including the Middle East, Europe, and Africa), actual rental prices increased by 2.1% in the third quarter of 2023, driven by increased demand for high-quality spaces meeting green office standards.
Average annual gross rent also increased by 1.1% quarter-on-quarter, mainly due to increased rents in Milan, Frankfurt, and Madrid. In addition, the Dubai market continued to witness new companies registering and expanding offices, with high demand leading to the gross rental costs increasing by 1.2% and actual rental prices increasing by 2.0% during the third quarter of 2023.
According to Mr. Paul Tostevin, most of these investment changes stem from challenges in the United States – a market experiencing a significant shift towards hybrid work models, leading to an increase in vacant office space. The Director of Savills World Research shared that “This is the result of a drastic change in working trends and a reduction in the scale of tenants in the information technology sector. Obviously, this trend is mainly happening in the United States and Western countries, but it is a large market and indirectly impacts Europe and Asia, although the impact in Asia is limited.”
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Mr. Paul Tostevin – Director of Savills World Research
According to Savills’ report on the high-end office market, in the third quarter of 2023, Asia continues to maintain stability compared to other regions. However, the total of actual rental prices decreased by an average of 0.1% across the continent, mainly due to rental decreases in China and Hong Kong – two markets with large new supplies, causing a decrease in average occupancy rates and putting pressure on rental prices. Specifically, the occupancy rate has decreased by 0.7%, and rental prices have decreased by 1.4% year-on-year in the two markets.
Notes when investing in green office buildings
Health, safety, and quality factors are top priorities for every tenant
In terms of trends, health, safety, and quality are the top priorities for all tenants. Offices that do not ensure standards of fresh air or comfortable space will face competitive risks compared to new buildings. Especially, as more and more businesses consider reducing carbon emissions and ensuring a sustainable environment as one of their key policies.
Following the general global trend, Savills Real Estate Market Report in the third quarter of 2023 indicates that currently more than 85% of companies in the fastest growing business group in Vietnam have been committed to ESG criteria. This is driving a rapidly increasing demand for offices that meet green standards.
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According to Savills Vietnam’s recent Market Overview Report, there are a number of upcoming green office projects in Hanoi, including Gelex 10 Tran Nguyen Han, 36 Cat Linh, Tien Bo Plaza, and more. It is estimated that by the end of 2025, Hanoi will provide about 68,400 square meters of green office space. Similarly, in Ho Chi Minh City, more than 80% of the city’s future supply of Grade A and B buildings is expected to have green certification.
TechnoPark Tower is a green office building project in Hanoi that has achieved LEED certification
Providing a general overview of the ESG trends in the Vietnamese real estate market, Mr. Paul Tostevin said: “Vietnam has the opportunity to become a regional leader in sustainable development. Global investors are paying more attention to ESG factors. Therefore, to continue attracting investment, Vietnam needs a comprehensive development plan that includes sustainable environmental measures. Additionally, it should include socially sustainable standards, ensuring the project development process with safety measures, labor protection policies, as well as relocation and site clearance processes.” According to Mr. Tostevin, Vietnam needs to focus more on ESG factors to attract investment capital and also become one of the leading countries in the region in sustainable development.
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Onehub Saigon, a green office building with LEED Silver certification
The Director of Savills World Research emphasized that this will be a common trend for global investors when they expand into new markets to purchase assets or develop projects. Investment destinations need to meet clear criteria for sustainable development. As for the ESG aspect, if a location does not meet the business’s minimum requirements, they will not be able to invest in that area. Therefore, ESG factors will become increasingly popular and impact all aspects of the real estate sector. Countries need to establish policies and legal frameworks to provide transparency for international investors.
Conclusion
Vietnam is currently facing a significant opportunity to become a leading nation in the field of sustainable development of green office buildings. However, a major challenge lies ahead as the number of green constructions does not yet correspond to the country’s true potential. Achieving international certifications such as LEED Platinum, Green Globes, and others is not only a challenge in terms of quantity but also in terms of quality and complexity.
Overall, the completion of a green building requires innovation and substantial investment in technology. The application of modern technologies in operations not only helps minimize negative environmental impacts but also reflects Vietnam’s commitment to sustainable development. Additionally, creating a positive business environment, and promoting research and development in the field of green construction, is a crucial key to enhancing the country’s position in the international community.
