Việt Nam’s office real estate market is showing potential for developing green and flexible models due to the inevitable needs of the international market, especially the Grade A office segment.
ESG, or Environmental, Social, and Governance, now underpins good business and is driving governmental, societal and business strategies. Việt Nam has committed to “net-zero” carbon emissions by 2050, which means sustainability and ESG goals and demand will likely drive the market in the coming years.
This will have a particular influence on office performance, with increased demand for green office buildings like those with Leadership in Energy and Environmental Design (LEED) or Green Mark certifications.
In Việt Nam, listed companies must now include ESG information in annual reports or submit sustainability reports. The State Securities Commission of Việt Nam has created a handbook on green, social and sustainable bonds and guidelines for greenhouse gas (GHG) reporting in collaboration with the IFC (International Finance Corporation).
There has been a sharp increase in the expectations of consumers, shareholders, investors, employees and stakeholders about ESG performance. PwC’s ESG trends report in 2023 highlights that sustainability and ethical criteria influence 60 per cent of purchasing, increasing by 10 per cent compared to the same period in 2022.
Businesses and organisations can use their real estate to reflect their commitments to legal and stakeholder demand for sustainability. This is driving demand for green offices.
Hoàng Nguyệt Minh, Senior Director of Commercial Leasing at Savills Hà Nội said: “More than 85 per cent of Việt Nam’s fastest-growing companies have ESG commitments, which is driving a surge in demand for offices that meet green standards.
“However, Ha Noi currently only has four office projects with green certifications, including Capital Place (LEED Gold), TechnoPark (LEED Platinum), and Taisei Square Hanoi (LEED).”
The Green Building Council (USGBC), a leader in the green building field, created LEED awards in the 90s to implement an open and balanced green rating system. This is one of the most widely used green building rating systems in the world and is a symbol of sustainability achievement and leadership.
Green offices support reduced resource consumption, which can result in reduced operational costs but also improved long-term operational efficiency given the use of energy-efficient systems, sustainable materials, and waste reduction measures.
According to Savills Asia Pacific ESG, from the end of 2023, office buildings with green certificates have had rents 7.5 per cent higher than conventional projects.
Minh added: “In 2024, we forecast demand from tenants working in energy and power, manufacturing, and consultancy. European, Japanese and Singaporean enterprises are actively seeking environmentally sustainable office spaces, which is positive for green certified projects in the pipeline.”
Green office stock in Hà Nội remains limited, and TechnoPark Tower is the first and only office building with a LEED Platinum certification in Hà Nội, the highest ranking of LEED certification.
According to Savills Hà Nội, in 2023, there was a notable increase manufacturing leasing, driven by an influx of FDI. Manufacturing tenants took the largest total leased area, with information and communications technologies (ICT), finance – insurance – real estate (FIRE) and education tenants following closely behind. Developments with green certificates like Capital Place, Lancaster Luminaire, and Lotte Mall are popular and had the most transactions in 2023.
Given rising demand, developers are responding. In Hà Nội, upcoming developments are set to deliver an additional 68,499 sq.m of green office space by the end of 2025.
Increasingly, occupiers cannot ignore the importance of ESG in their business longevity, and using real estate as a tool to achieve green goals delivers long-term benefits to their business performance.
Among more than 20 green certification systems, the most popular international green certifications in Việt Nam now are LEED and Green Mark with a total of about 20 projects recorded. Of which, there are up to 17 projects in HCM City.
Troy Griffiths, Deputy Managing Director of Savills Vietnam said: “Việt Nam has a strong SME base and a very active start up environment. These users do not typically take formal office space and so co-working space has grown extensively.
“As these occupiers’ businesses mature then they will require formal office space and therefore increase demand, that may be best satisfied with hybrid models.”
Commenting about Việt Nam’s market, Troy added: “Influences of demand change quickly in a dynamic business environment, such as Việt Nam. With HCM City’s recent rapid growth in FIRE and ICT industries then the formal office occupiers will continue to require highly functional and pleasing space to satisfy the young workforce.”
(VNS)
