Green the way to go

21:44 | 02/01/2011
Hawkins Pham from Indochina Land, the real estate division of Indochina Capital, discusses why developers in Vietnam have started to embrace green building designs.
The race to embrace all things green is colouring developers’ visions


Urban real estate investments in Vietnam benefit from the confluence of rapid urbanisation, a mushrooming middle-class, and sustained economic growth.

Hawkins Pham oversees investor relations and fund reporting for Indochina Land, the real estate division of Indochina Capital and one of Vietnam's most prominent real estate development and fund management firms. Indochina Land has just opened the Six Senses Con Dao Resort and Private Residences development, which is a Green Globe 21 certified property.

Hawkins Pham oversees investor relations and fund reporting for Indochina Land, the real estate division of Indochina Capital and one of Vietnam's most prominent real estate development and fund management firms. Indochina Land has just opened the Six Senses Con Dao Resort and Private Residences development, which is a Green Globe 21 certified property.

In the past decade, Vietnam, the world’s 13th largest country by population (now 86 million), has emerged as one of Southeast Asia’s greatest economic success stories, as evidenced by consistently strong gross domestic product (GDP) growth - average annual GDP growth of 7.25 per cent for the last decade - driven by both exports and domestic consumption.

As the country shifts from a rural-agrarian society to an urban-industrial, serviced-based economy, Vietnam has experienced a significant increase in urbanisation, which stands at approximately 30 per cent today and is expected to increase to 45 per cent by 2020. With a young demographic base - 70 per cent of the population is under the age of 35 - Vietnam’s long-term potential looks considerably promising particularly in Hanoi and Ho Chi Minh City, which PricewaterhouseCoopers project to be the top two fastest growing urban economies in the world between 2008 and 2025.

Environmental imperatives

While Vietnam’s built environment expands at pace with urbanisation, the country is faced with the inconvenient reality of looming environmental concerns, primarily rising sea levels as a result of climate change. According to the World Bank, Vietnam is one of 12 countries with the highest exposure to climate change and is considerably threatened by rising sea levels. Up to 12 per cent of its total area, 10 per cent of its people, and 10 per cent of its gross domestic product will be potentially affected if sea levels rise by one metre, according to a study undertaken by UNDP.

Nine of the 10 provinces in Vietnam expected to bear the brunt of rising sea levels are in the Mekong Delta, but the effects on Ho Chi Minh City could be equally as damaging. Infrastructure and housing in the city would likely be affected, and as “refugees” of climate change migrate from the delta towards urban areas, there will be increased energy demand and capacity pressures on existing infrastructure and social services. 

However, the problem with rising sea levels is that no one knows when it will happen or what the collateral damage will ultimately be. While sea levels may not rise a metre within the 21st century, real estate developers should be cognisant of their contribution to global warming, as studies estimate that buildings account for approximately 30 per cent of the world’s energy consumption and a similar amount of the world’s carbon dioxide emissions.

In the face of this environmental imperative, property developers in Vietnam have started to initiate sustainability practices and are looking to mitigate their environmental impact by adopting green buildings strategies.

Vietnam goes green

CentrePoint, Vietnam’s first green office building built on spec, opened in mid-2009 and is designed to qualify for a four-star “Green Star” rating under Australian regulations. Refico, the developers of the property, project that the building’s architectural design and systems reduce energy consumption by 30 per cent, translating into lower carbon emissions and ultimately cost-savings for its tenants.

The property, which opened in Ho Chi Minh City amid the trough of the global financial crisis, was slow to gain traction, but its environmental efficiency and high green standards have attracted blue chip tenants like Bayer, Kimberly-Clark and Toyota, who have sustainability requirements in their office leasing programs.

At the time of design and construction, there was no system in Vietnam to measure CentrePoint’s environmental performance. However, in early June, the three-year-old Vietnam Green Building Council (VGBC) officially launched LOTUS, a sustainable rating system for non-residential buildings in Vietnam modelled on existing accreditation frameworks, such as LEED (Leadership in Energy and Environmental Design), Green Star and Green Mark.

LOTUS is composed of nine different credits, covering energy conservation, water conservation, material conservation, ecology, pollution and waste, health and comfort, adaptation and mitigation, community integration and management. Following the review of other established programmes, it became apparent to the VGBC that other certification standards were not entirely applicable in the context of Vietnam, and the challenge for the VGBC was to devise a certification framework suitable for the local market. 

“LEED doesn’t really fit here. It can under certain constraints but the standards set forth by LEED are very US-centric,” according to Melissa Merryweather, founder of Green Consult-Asia and one of the chief architects of the LOTUS rating system. “LOTUS has adopted construction and building regulations of the Ministry of Construction (MoC), and one of its primary prerequisites is that rated buildings must follow the MoC’s energy efficiency building codes.”

Support for LOTUS is swelling in the local market, and early pilot projects have included a production factory for Nike outside of Ho Chi Minh City and a UN building in Hanoi. Even the People’s Committee is going green, with the Department of Science and Technology in Ho Chi Minh prospectively developing a new LOTUS rated office building.

Opening up the Home

As demand for environmentally efficient buildings is beginning to resonate, it is expected that more developers will attempt to meet green certification standards. In 2011, the VGBC intends to expand the scope of LOTUS to include a rating tool for residential developments, as more homeowners see the benefits of going green - reduced electricity demand, more secure buildings and greater quality of life.

However, certification is not a prerequisite for developers to design environmentally efficient buildings, and many architects and developers begin the design process with the challenge of environmental perspective.

“The first thing we look at when configuring a master plan to a specific site is how the building will interact with the surrounding elements, such as solar exposure, wind direction, and sightlines,” said Rick Hirsch, general director of Saigon South Residences, a new residential complex to be developed by Indochina Land.

Located in the Nha Be district of Ho Chi Minh City, the property is comprised of approximately 1,200 units. Indochina Land is in the process of finalising the design, having chosen to work with the local office of DWP, and will look to break ground on the development as early as the first quarter of 2011.

“Our vision for Saigon South Residences is to build a modern yet affordable residential complex aimed at the middle-income market,” according to Hirsch. “We, however, are spending a great deal of time on ensuring that the buildings are environmentally efficient, a process that starts with simple concepts such as building orientation and material selection.” 

The benefits of basic green residences are immediately passed on to homeowners. For instance, if an architect reduces a building’s window area or provides a shading element on the western façade, where solar exposure is most intense, there will be less demand for cooling the interiors and subsequently lower electricity requirements. With lower utility needs, electricity bills will be reduced and so too will the hidden environmental costs, such as greenhouse gas emissions.

Future outlook

Positive economic growth has brought optimism to the real estate market. Since the downturn in 2008, construction starts have increased across all sectors, with notable supply increases in the office markets in Hanoi and Ho Chi Minh City, as well as the residential and hospitality sectors in select submarkets. Against the backdrop of improved business sentiment, there is a noticeable uptick in the property market from both end-user and investor demand perspectives.

Since the start of 2010, Vietnam’s property market has steadily improved on par with the continued expansion of the economy. The trajectory of the domestic real estate market is linked to that of the economy, and with brighter economic outlooks onshore and off, Vietnam’s property sectors have experienced positive momentum, a trend that is forecasted to continue through the New Year.

However, as supply increases in the commercial real estate and residential sectors, developers will find it more challenging to differentiate their developments and attract tenants and buyers. An easy solution for developers is to “go green.”

Not only will the benefits enhance the bottom-line, green building design will also support sustainability initiatives for future generations in Vietnam.

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