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Is there a greener pasture in the Philippine real estate market?

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Green building certifications set opportunities to push green growth in the Philippine market particularly in residential developments outside Metro Manila.

 

The Green Market in the Philippines

According to the Global Green Growth Institute, Green Growth is the economic development that is sustainable for environmental protection and remediation, while at the same time promoting job creation, improvements in social equity, and other related objectives.

Natural disasters such as typhoons, flooding, earthquakes, and even volcano eruptions are a constant threat to our economy and society. Yet, there seems to be a disregard on the importance of preparing for it on a long term basis; is it because we are a resilient culture or is it because it’s not a priority to plan for such pressing issues. Last year, the lead policy making body to address climate-resilient and climate-smart programs in the Philippines, the Climate Change Commission (CCC), proposed a Php 276.09 B for the next fiscal plan to increase its funding for climate change mitigation and adaptation. Some of their popular programs include the Communities for Resilience (CORE) and the People’s Survival Fund (PSF). From the private sector, a total of USD 1.5 B worth of green bonds have been floated in the market to further support the push for more green buildings in the pipeline that are mainly designed to address the UN’s Sustainable Development Goals (UNSDG). The International Finance Corporation (IFC) estimates an investment opportunity of USD 2B under the commercial market and USD 12 B under the residential market in the Philippines throughout 2025. Indeed, the grass is greener on the side of the green economy!

Green Building Certifications: Champions for Real Estate’s Green Growth

The role of the real estate industry in supporting efforts to achieve the country's Nationally Determined Contributions (NDCs) to the Paris Agreement is critical as a driver for growth. The real estate industry directly impacts opportunities in the economy, society, and the environment. Green building certifications became this authenticity seal to all end-users for standard green building practices that are commonly understood and appreciated by the middle and upscale market. Some of the green building certifications widely used in the Philippines are LEED (Leadership in Energy and Environmental Design), BERDE (Building for Ecologically Responsive Design Excellence), WELL, and EDGE (Excellence In Design and Greater Efficiencies). These rating systems are not competing with each other but rather trying to complement each other in addressing a common goal: To support the Philippines' commitment to reducing emissions by 70% by the year 2030.

The immediate benefit of applying green building standards is to promote a safe environment, improved health and wellbeing, and addressing the environmental impacts of real estate development. Some of the design strategies already implemented within green buildings in Metro Manila that are easy to adopt in provincial developments:

  • access to natural lighting that helps enhance the body's productivity, appropriate visual activity, and improve body’s circadian rhythm.
  • access to clean indoor air quality that will help limit physical discomforts from the eyes, nose, and throat.
  • proper interior acoustic planning that will reduce physiological distraction from internally generated noise and exterior noise intrusions.
  • level of thermal comfort which may reduce the use of air-conditioning, therefore, decreasing utility cost.
  • low-flow fixtures that reduces the waste of water and, therefore, reducing overall water demand.
  • properly designed wayfinding within the development that will promote active movement from one place to another.

By adopting these strategies for both commercial and residential buildings, project owners can immediately enjoy utility cost savings, reduced maintenance fees from sustainably sourced materials, higher-valued assets in the long term, and reduce overall greenhouse gas (GHG) emissions.

How is the real estate industry participating in all this?

Some real estate developers have already adopted the practice of sustainable development as this is most commonly seen in their office developments in central business districts. Green buildings usually attract conglomerates that adopt sustainable business practices within the company’s Environmental, Social, and Governance (ESG) principles who are willing to pay a premium for green buildings compared to non-green buildings.

There is a total of 8.2 million square meters of various building types that were registered in 2019, 80% of this supply is already certified. Project owners demonstrated that they are fully committed to supporting the green building industry by implementing policies and strategies that reduced the use of energy, water, and GHG emissions within their developments. Sustainable real estate development has become more than just a developer's marketing slogan; it is now part of the mission statement. 

Office developments within the established central business districts are at the forefront of the green building industry, with 87% of the 6.5 million square meters of certified green space being office spaces. The remaining 13% is a combination of hotels, industrial buildings, retail establishments, institutional buildings, and residential condominiums. However, in more recent years, the growth of Green Building has expanded not only within the established CBDs, but also in emerging provincial markets particularly in the residential, industrial, and institutional sectors. 

In the provincial market, 38% and 43% of certified green buildings are industrial and office buildings, respectively. In residential development, green strategies are now being planned and implemented for both the economic and the upscale segments. One example is Via Verde in Batangas by Imperial Homes Corp., which installed solar panels and used low embodied-energy materials in building their homes. According to a feature article, residents can save at least P2,000 from energy costs and divert those savings to other household expenses. In Laguna, a new participant in the horizontal upscale market, ArthaLand’s Sevina Park is vying for a LEED Certification for Neighborhood Developments and LEED Home Certifications, first of its kind in the horizontal market. They designed their villas to adopt sustainable features that address energy efficiency, improved indoor air quality, and the use of sustainably sourced materials.

Colliers View

There is a huge opportunity for the horizontal market outside Metro Manila to push green growth in the real estate market. Based on Colliers’ 2019 research data, the primary market has launched at least 400,000 house and lot units in key provincial markets, and the Economic and Affordable segment composes of 48% and 29% of the total supply. There is a strong and stable demand in these markets since the remaining inventories average only around 10% for these segments.

There is an untapped green market in the provincial area, especially in the municipalities of Southern and Central Luzon, where demand for residential housing is stable. Project owners and planners must work collaboratively to find ways of adopting green building strategies into residential developments and create an offering to the applicable market segment. For financial institutions to support developers and home buyers, there's a need to bridge the gap to finance and insure green developments. The central bank has started working on a set of guidelines for transparent sustainable business reporting. The data from these reports can help guide the creation of business incentives and accelerate the industry.

The following figure shows how each stakeholder can support the green side of the value chain.

green building