We have long understood that buildings, and especially commercial buildings, are at the forefront of many of society's most pressing issues. Water, waste, and significant energy use with the resultant carbon emissions, are each drawing the attention of a growing list of constituents and stakeholders. For example, governments have adopted ever-stricter building codes, comparable to fuel-efficiency standards for cars. Also, the European Union mandates the construction of zero-net energy projects by 2020 (by 2018 for public buildings). Occupiers are increasingly translating corporate carbon and Environmental, Social, and Governance (ESG) goals into requirements for the buildings they occupy, demanding efficient buildings and energy sourced from renewables. And finally, lenders are gradually starting to assess collateral on its energy efficiency, offering carrots such as reduced rates for more efficient buildings, and sticks for non-efficient buildings.
In the face of these issues, building owners have been progressively improving the environmental performance of their assets, but for those active in the commercial real estate market, it is challenging to assess the importance and diffusion of energy efficiency in the national or local market. How does this compare across markets? One way to measure the importance of energy efficiency in buildings is to assess the use of "green" building certification programs. Such certification programs have been in place, in various forms, for more than a decade across the global commercial property market. Although no green building certification program is the same, they all share basic characteristics, such as measuring energy performance, assessing a multitude of other dimensions of sustainability, and providing external certification through typically independent providers.
To discover how the market for "green" building has progressed over time and across markets, we developed a comprehensive, annual review, the U.S. Green Building Adoption Index, a collaborative effort between CBRE and Maastricht University, detailing the growth and distribution of "green building" certifications in the top 30 U.S. markets since 2005. In these annual reviews, published since 2014, we have measured the number and percentage of space in each market that has achieved a defined green building certification. In this report, we are expanding the U.S. Green Building Adoption Index to the global real estate market, seeking to measure the adoption of green certification programs across several international real estate markets. Information on market size (number of buildings and/or square footage of space) is provided by the local teams of CBRE, while the numerator of each index includes a wide variety of "green" and energy certification schemes, such as BOMA BESt, BREEAM, DGNB, HQE, LEED, NABERS, and Green Star (see Appendix A for an overview of schemes). This International Green Building Adoption Index (IGBAI) is similar in spirit to the U.S. Green Building Adoption Index described above, and initially covers 10 cities in Australia, Canada, and Europe. Each market is covered in detail in this report, including a detailed discussion of the methodology.
In the 10 markets covered by this report, we document that 18.6 percent of space is now certified as "green." This represents more than 227 million square feet of green space, out of a total of 1.2 billion square feet of office space reviewed. This is a significant increase from just 6.4 percent a decade ago, in 2007. Market-specific details are below:
- Melbourne: 29 percent of office space in the CBD was certified under the Green Star or NABERS program at the end of 2016, compared to just 1.4 percent at the end of 2006.
- Sydney: 46 percent of space in the CBD was certified under the Green Star or NABERS program at the end of 2016, compared to just 0.8 percent at the end of 2006.
- Toronto: More than 50 percent of office space was certified under the BOMA BESt or the CAGBC LEED program at the end of 2016, compared to 15 percent at the end of 2006. Measured by number of buildings, the adoption of both programs increased from 2.5 percent at the end of 2006 to more than 20 percent at the end of 2016.
- Vancouver: Almost 52 percent of office space was certified under the BOMA BESt or CAGBC LEED program at the end of 2016, compared to 29 percent at the end of 2005. In number of buildings, the adoption of BOMA BESt and CAGBC LEED increased from 6.7 percent at the end of 2005 to approximately 24 percent at the end of 2016.
- Amsterdam: BREEAM-NL is the dominant rating program in Amsterdam. At the end of 2016, almost 11 percent of office space was certified under the BREEAM program, compared to just 0.2 percent at the end of 2011. The Amsterdam office market included only 2 LEED certified buildings by the end of 2016.
- Frankfurt: Two certification programs are used frequently in the Frankfurt office market: DGNB and LEED, with limited overlap. At the end of 2016, 13 percent of space was certified by LEED, compared to just 0.2 percent at the end of 2009. In comparison, at the end of 2016 5.1 percent of space was certified by DGNB, compared to 1.4 percent at the end of 2009.
- London: BREEAM is the dominant building rating scheme in London. Despite a high number of BREEAM certified buildings, the adoption levels for London are relatively low. At the end of 2016, 9 percent of office space in London was BREEAM certified.
- Paris: A variety of programs are used in the Paris office markets, although HQE is most prevalent. At the end of 2016, approximately 9 percent of office space was certified under HQE, BREEAM, or LEED, compared to just 0.1 percent at the end of 2007.
- Stockholm: LEED is the dominant rating program in the Stockholm office market. At the end of 2016, almost 12 percent of space was LEED certified, compared to just 1.2 percent at the end of 2009. Only one building in the office market is certified by BRE.
- Warsaw: Like Frankfurt, both BREEAM and LEED are frequently employed in the Warsaw office market, although again with limited overlap between both programs. At the end of 2016, 12 percent of office space was certified under the BREEAM program, compared to just 1.2 percent at the end of 2011.
- New York: For comparison purposes, we include the 2016 data from the U.S. Green Building Adoption Index. In 2016, 20.2 percent of the Manhattan office market was certified by LEED, compared to just 0.3 percent in 2006.
The numbers in the International Green Building Adoption Index come with some qualifications. This report includes certification data on office buildings only and other property types are excluded. We further exclude owner-occupied or government buildings. In line with the CBRE definition, we filter out all green-certified assets that are deemed "illiquid." Finally, CBRE typically covers just the central business district and parts of a city with significant office market activity. We only include green-certified assets within the CBRE market boundaries. It should be further noted that, unlike the U.S. markets reported on in our prior work, these global markets are not consistent in data or approach. Our ability to measure total stock per market varies and market boundaries are often indistinct, while the definition of “liquid space” tracked by CBRE varies across markets. Green certification programs often include many owner-occupied and government buildings, which are manually excluded from our measure of green stock per market. Some markets provide detailed information on building count and building square footage, while some markets only measure space, but not the number of buildings. Finally, address data is often inconsistent from development to project completion. As with the U.S. Green Building Adoption Index, many of these initial issues will be addressed and resolved in the coming years. We believe that this report provides some good first insights into what has become a global phenomenon: green building certification.
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