Green finance seen as growth field in real estate

Developers, investors and property consultancies are encouraged to think green as China steps up construction of eco-oriented assets.

Real estate developers, investors as well as property consultancies should all take an active approach to being green, smart and innovative in order to win a competitive edge among industry counterparts, global real estate services provider JLL said in its latest white paper on green finance.

"Along with increasing awareness of green finance and ESG (environmental, social and governance)-related responsible investing among the Chinese financial institutions and real estate developers, the development of green finance in China is expected to witness rapid growth in the coming years," said Andrew Kam, senior director of China valuation and advisory services at JLL. "Driven by both government policies as well as the capital, the development and investment potential for green finance and green building is becoming a key focus in the Chinese market."

China issued green bonds worth 210.3 billion yuan (US$29.7 billion) in 2018, accounting for 18 percent of the world's total and ranking itself second globally only after the US.

A recent survey conducted by JLL in partnership with GRESB, the world's leading ESG benchmark for real estate and infrastructure investments, also showed promising investment prospects for green buildings in China.

About 85 percent of respondents said they believe green real estate assets bear good prospects for value appreciation and are willing to hold the assets for an average of 9.7 years, compared with four to six years by investors of ordinary real estate assets. Meanwhile, nearly 70 percent of respondents believed IRR (internal rate of return) of green assets should be higher than non-green ones, according to the survey.

Statistics from the US Green Building Council, which introduced LEED (Leadership in Energy and Environmental Design), a green building certification system, found that in the first half of 2019, the average rents of LEED-certified offices in major Chinese cities were about 6.1 percent to 13.8 percent higher than those without the certification, while LEED-certified offices in Beijing, Shanghai, Guangzhou and Shenzhen enjoyed a premium of at least 10 percent in their sales price.

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