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Future-proofing the office market: Why green certifications matter more than ever

Office real estate, Office market in Metro Manila, Office market in the Philippines, Office landlord, Landlord Representation, Green certifications, LEED, WELL, EDGE

As we start to gradually welcome workers back to the office, we might as well offer them office spaces that protect their health and well-being.

 

Metro Manila’s office market is a far cry from what it was just three years ago. Before the Covid-19 pandemic, many pundits had described the market as landlord driven exemplified by tight supply and a large pool of occupiers willing to fork over a premium for high-quality office space, especially in established business districts such as the Makati CBD and Bonifacio Global City. In fact, Colliers’ Q4 2019 property market report showed that vacancy in Metro Manila dropped even further to 4.3% from 5.0% posted a quarter earlier. Office space absorption was also particularly strong in Quezon City, the Bay Area, Alabang, and areas in the southern part of Metro Manila, where buildings completed in Q4 2019 were fully leased.

But what a difference two years would bring. It is an understatement to say that the Covid-19 pandemic has significantly altered Metro Manila’s office landscape. With many companies shuttering and the flight of POGO players, a good number of commercial buildings suddenly found themselves losing tenants. What used to be bustling business districts are now shells of their former selves, empty and practically devoid of activities. Companies nowadays are finding ways to ask their workers to return to the office, while many others are considering implementing permanent flexible-work setup. And the with the office market still trying to find its footing, office landlords are now finding themselves with a dilemma: how to market their products to a more discerning pool of prospective tenants.

But in any down market, there is always light at the end of the proverbial tunnel. Colliers’ third quarter 2021 data shows that although vacancy continues to rise, it is now at a slower pace. While it retains its vacancy forecast of 15.6% for 2021 as pre-commitment among upcoming buildings remains muted, outsourcing and traditional corporate occupiers (companies in various sectors, such as legal, engineering and construction, government agencies, and flexible workspace operators) offer an opportunity and will continue to drive office demand in Metro Manila, according to Joey Roi Bondoc, Colliers Associate Director and Head of Research.

He adds: “Over the next 12 months, the improvement in vaccination rates, relaxation of mobility restrictions, and rise in business confidence should buoy office space absorption. The availability of options in prime locations and attractive rents should enable occupiers to move from non-core to core locations.”

And these options, fortunately, include more green and sustainable office buildings.

The rise of green buildings

It is true that commercial occupiers have more options right now for their next office, including the option to forgo offices altogether in favor of work-from-home setup. Consequently, landlords must now look for creative ways to bag that next big lease transaction, one of which is to get green building certification for their properties. But what make these certifications more important in a post-Covid-19 world?

Putting aside the fact that the only way to reduce real estate’s environmental impact is to quantify what it is contributing to begin with, there are several reasons why a green certification is worthwhile.

Aside from affording them the appropriate credentials to satisfy their ESG (Environmental, Social, and Governance) standards, many occupiers are also now attributing the growing importance of green and sustainable buildings to staff productivity, health, and overall happiness. According to a survey conducted by the U.S. Green Building Council (USGBC), employees who work in LEED-certified buildings are happier, healthier, and more productive than employees in conventional, non-LEED buildings. In this same survey, workers were also found to favor companies that are value-oriented, take stances on important issues like sustainability, and do their part for making a positive difference in the world.

Aside from the overall health and well-being of workers, the economic benefits of green and sustainable buildings cannot be overlooked.

Another study conducted by the USGBC shows that “LEED buildings have reported almost 20 percent lower maintenance costs than typical commercial buildings, while green building retrofits typically decrease operation costs by almost 10 percent in just one year.”

Meanwhile, key findings of the 2015 Green Building Economic Impact study prepared by Booz Allen Hamilton in behalf of USGBC showed that green construction’s total impact on employment in 2015 equaled more than 2.3 million U.S. jobs, which roughly contributed more than $134.3 billion in labor earnings for working Americans that year.

Green building certifications going red hot

While green buildings in the past meant higher premium because of unavailability of technology and a small pool of green construction professionals, things have gradually improved over the last decade. Green technology vendors are multiplying fast, driving fair competition and pricing transparency.

It also helps that many governments are taking a proactive stance in fostering a business environment that puts sustainability high on its agenda. In 2015, the Philippine government introduced the Green Building Code, which aims to reduce greenhouse gas emissions by boosting energy efficiency in building design, construction, and operation. The code also sets the minimum green standard related to energy efficiency, water and wastewater management, solid waste management, site sustainability, and indoor environmental quality.

The government also released, through the Department of Energy, the Philippines Energy Efficiency and Conservation Roadmap (2017–2040), which provides a trajectory for the country to achieve its energy efficiency goal by 2040. In this roadmap, the Philippines commits to reduce, against a 2014 baseline, by 2040, energy consumption in commercial buildings by 25% and in residential buildings by 20%. One of the key outcomes of the roadmap was the Energy Efficiency Conservation Act, signed into law on April 12, 2019, and which aims to standardize energy efficiency and conservation measures by regulating energy-efficient technologies in buildings.

The availability of more green certification systems also means that there is at least one standard available for any building developer. The most commonly used in the Philippines are Leadership in Energy and Environmental Design (LEED) of USGBC, which awards four levels of certification: certified, silver, gold, and platinum; WELL, which, like LEED, awards silver, gold, or platinum status, but focuses more the impact buildings can have on humans’ health and well-being; Excellence in Design for Greater Efficiencies (EDGE), an innovation of IFC of the World Bank Group, which aims to empower emerging markets to scale up resource-efficient buildings in a fast, easy, and affordable way; and local initiative Building for Ecologically Responsive Design Excellence (BERDE), conceptualized by the Philippine Green Building Council, which certifies that a building is in compliance with local environmental laws and is in line with the programs of the national and local governments.

What the future holds

One of the upcoming commercial buildings to exemplify commitment to green and sustainable development is the Makati Commerce Tower. LEED Gold-certified (aspiring for Platinum), this next-generation Grade A office tower along Sen. Gil Puyat Avenue just recently held its topping-off ceremony, and when it welcomes its first tenants in the third quarter of 2022, the building will become a landmark for innovation and sustainability.

Colliers’ Joey Roi Bondoc said that more companies in the Philippines are now looking for sustainable and healthy work environments that will provide confidence for their employees to return to workplaces, an important consideration in a post-Covid-19 world. Indeed, as we start to welcome workers back to the office after the pandemic, we might as well do so on the promise that their health and well-being will be promoted, if not actively protected. One way to do that is to house them in sustainable and green buildings.


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Maricris Sarino

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Manila

Maricris has worked in real estate since 1998. She began her career as an Investment Consultant in Megaworld Corporation handling the leasing of Megaworld's office buildings, residential condominiums and commercial warehouses. In 1999, Maricris was tasked to conceptualized, set-up and operate the Eastwood Locator’s Assistance Center (eL@C) in Eastwood City CyberPark, the first ICT, mixed-use master-planned city in the Philippines. eL@C serves ICT and BPO companies as an one stop shop for real estate solutions, information center as well as a business center facility and headquarters for service providers and satellite government offices.

Maricris joined Colliers International in 2012 to provide real estate strategies and solutions to its current clients as well as to source new clients for the company.

In addition, Maricris founded the Children's Environmental Awareness and Action Foundation (CEAAF) that focuses on the development and implementation of programs and educational materials on Philippine flora and fauna as well as Filipino pride projects and events.

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Mara Chua

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Mara has over 7 years’ experience in the real estate industry in the Philippines.  She joined the Office Services Team of Colliers Philippines in July 2016 and brings with her a wide understanding of various real estate markets, deal structuring, lease negotiations, and conceptualizing different marketing strategies.

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Charles Serviano

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In 2008, he transferred to the Office Services as an Analyst where he was tasked to manage the Department’s database. With this, he gained exposure in the facets of property services and transactions. He was then promoted to Negotiator in 2009.

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