In recent years, companies around the world have been pursuing sustainability initiatives as seen in their adoption of Environmental, social, and governance (ESG) targets. These goals look at factors such as lower carbon footprints, transitioning to renewable energy sources, and conserving water, among others. As more businesses walk towards the path of sustainability, they are ensuring that every move they make is aligned with their ESG goals, even in choosing where to locate their operations.
For the country’s property market, this focus on sustainability has resulted in a higher demand for green certified office buildings as well as rising interest for green features in industrial spaces.
“From 2022 numbers compared to 2024, there’s significant improvements when it comes to green building adoption across the board, “ CBRE Philippines Tenant Representation Director Garri Amiel Guarnes said, referring to the Metro Manila office market.
Data from CBRE showed that the Fort Bonifacio office market registered a 73 percent green building adoption rate compared to the 63 percent registered in 2022. The Ortigas office market also saw a significant jump in green building adoption now at 66 percent from 42 percent two years ago.
Other major business districts also saw improvements in green building adoption such as Alabang (67 percent), Quezon City (45 percent), Bay Area (44 percent) and Makati (43 percent).
CBRE noted that major developers made significant gains to green building adoption with use of the International Finance Corporation (IFC)’s EDGE green building tool, which serves as a catalyst for existing buildings to pursue certifications.
“And it’s really a pathway for a lot of the developers already with existing buildings to assess how their building design is able to contribute to sustainability initiatives of the market that we’re in today,” Guarnes said during the CBRE’s recent mid-year market briefing.
Growing demand from office occupiers
Guarnes pointed out that the push for sustainability has resulted in occupiers looking to make purposive decisions when it comes to their sustainability initiatives and how they’re dealing with real estate. He noted that this can be seen in the large portion of office demand going to green buildings in market business districts in Metro Manila.
“For Fort Bonifacio and Ortigas, a big portion of the demand went into buildings with green certification. If you look at Fort Bonifacio, in the first quarter, 83 percent of the demand went to green buildings. Second quarter about 76 percent went to green buildings. Same thing with Ortigas, 69 percent in Q1, 84 percent for Q2,” Guarnes said.
“Now for Makati, only 46 percent went to the buildings or buildings with green certifications. Why is that? If you scan the buildings, the market here along the core CBD a lot are aging, a lot are relatively older buildings,” he added.
This growing demand can be attributed to the rising trend towards sustainability targets. Data from CBRE Philippines showed that 68 percent of its client base in the country have already set ESG targets.
“So whether that’s for 2050 or earlier a lot of our clients have already set Net Zero targets or sustainability-focused targets. And for those who have targets set later on 2040, 2050, a lot of these companies have also set interim emissions reduction targets. And we’re seeing that for 2025 and 2030, these are critical dates for a lot of our clients to meet production targets,” Guarnes said.
The CBRE official explained that this will have implications on the office market in the site selection, negotiation and operation processes.
“From a site selection point of view, it’s now going beyond green certifications. While it’s good that the building has green certifications, occupiers are now looking into other factors: doing environmental due diligence, looking into climate risk assessments not only for the specific building but for the surrounding immediate environment in the vicinity of the building,” said Guarnes, adding that this already a major consideration of occupiers before sending a request for proposal (RFP) as well as in the negotiation stages.
“When they do tap the developers for potential transactions, they’re already incorporating green lease clauses into the discussion even before the contract stage. Some occupiers already want commitments from landlords at the LOI (Letter of Intent) stage and some even requiring landlords to make significant investments into their property before the tenant starts their fit out,” Guarnes said.
Meanwhile, for occupiers who are already operating within the buildings, Guarnes said a lot of them are asking landlords for renewable energy sources.
“Landlords are still trying to find a way to operationalize this. And some are also looking for audit trails or waste and freshwater consumption and how it’s being reduced. We even have occupiers wanting landlords to divert more than 95 percent of residual waste away from landfills. So it’s a tall task even for those landlords engaged in or those who have sustainability top of mind. This is a big challenge. There’s a lot of ways where occupiers are really going deep into these kinds of discussions, and landlords, on the other hand, are looking for ways to address these types of conversations,” Guarnes said.
Provincial office market sees slower green building adoption
In contrast to the Metro Manila office market, Guarnes said green building adoption is observed to be low.
“That’s likely because of developers more focused towards third party outsourcing or BPO companies. But moving forward, these companies and the clients they serve would also or will be implementing their sustainability strategy. They would have set targets whether again that’s 2040, 2050 or even earlier. It will trickle down to third party outsourcers,” Guarnes said.
Data from CBRE showed that green buildings only accounted for 23 percent of the Cebu market’s office stock
“We profiled the Cebu buildings that were completed over the past years, starting from 2020, about 60 percent of buildings that were completed in Cebu would either have green certifications or already are under application. So 60 percent of the buildings in Cebu are being primed for green building adoption,” Guarnes said.
Apart from Cebu, Davao also registered a 24 percent green building stock. On the other hand, Iloilo and Pampaga posted green building stocks of 16 percent and eight percent, respectively.
Industrial, Logistics Occupiers Eye Green elements
The office market isn’t the only real estate sector affected by sustainability-driven goals as a growing interest for green features is also seen from industrial and logistics occupiers.
Results of CBRE Asia Pacific Leasing Sentiment Survey showed that 58 percent of industrial and logistics occupiers in the region cited renewable energy supply as the most important consideration.
Additionally, 53 percent of occupiers also cited green building certification as another important consideration, while 48 percent cited features for better energy efficiency.
CBRE explained that in the Philippines, industrial park or warehouse developers usually leave it to occupiers to implement these green elements to the specific properties they lease out. However, occupiers are now seeking more collaboration with developers for these efforts.
“But the key there is that occupiers’ expectations are already changing. So whereas before the developers really leave it up to them, now they want more collaboration with the developer,” Guarnes said.
As part of their sustainability strategies, CBRE noted that occupiers are integrating ESG requirements into site selection as well as partnering with landlords in green retrofits of leased assets.
On the landlord side, CBRE said they’re engaging with occupiers in formulating action plans for green retrofits of leased assets.
CBRE noted that for those projects or those buildings assets that can no longer be refurbished or retrofitted to be sustainable, developers are considering complete redevelopment of these buildings while again taking into consideration how these could impact the carbon footprint of the said property.
