Buildings are huge energy consumers, using more energy than the industrial sector last year. They are also the second largest emitter of carbon dioxide. However, the construction of new buildings in Asia Pacific is inevitable with economic boom and rapid urbanisation.
By end 2012, revenue from building construction contracts is expected to hit at least US$1,100 billion. Economic powerhouses such as China and India will make up almost 80% of the total market in building construction.
With green building policies and rating tools across the Asia Pacific, investing in green buildings in this region is no longer considered niche.
Assuming no major setbacks in the financial markets, the green buildings market is likely to grow at a compounded annual growth rate of nearly 30% from 2011 to 2015. Market participants across the value chain such as design, consulting, auditing, construction, and building equipment and materials are likely to gain from the market size of US$670 billion in 2015. The potential is immense, given that the market in 2011 is only US$230 billion.
Various opportunities arise along the value chain including building automation and energy management systems, integrated facilities management, water and waste management, and building materials. Green buildings also open their doors to suppliers of renewable energy systems, notably building integrated photovoltaic (BIPV), and other sub-segments such as rooftop landscaping, rainwater harvesting systems, and eco-friendly paints.
One must recognise that advanced technologies and systems installed in green buildings complement the development of information technologies (IT). IT solutions improve the use of resources such as electricity, water, and solid waste.
A fast paced development
Most countries in Asia Pacific have their local or national green building council (GBC), which are also members of the World Green Building Council (WGBC). From 2010 to 2011, the market witnessed the advancement of GBCs in Malaysia and Hong Kong from the status of “Prospective GBC” to “Emerging GBC”. Bangladesh also made its way into the global network when its GBC was accepted as a member under the “Associated Groups”.
Institutional matters aside, there are constant developments in the green buildings marketplace. Opportunities vary country to country and it is vital that investors understand this. Green building leaders in Asia Pacific, notably Singapore, Australia, and Japan, may have expanded their portfolio and expertise in green building projects and moved into international markets.
Emerging countries in green buildings such as Malaysia, China, and Indonesia face common challenges such as price sensitivity and inconsistencies in policies and enforcement. Nonetheless, with rising energy cost and the development of green building rating tools and standards, the market will be largely driven by the private sector collaborating with local agencies and non-governmental organisations.
Financial assistances in the form of loans, grants, or tax incentives from the governments are likely to be introduced. They will be the main catalysts for market growth.
Membership status of Asia Pacific green building councils in WGBC, 2012
Source: World Green Building Council (WGBC), May 2012
Huge disparities still exist in this region with respect to adoption, technology involvement, and public awareness. Nonetheless, the uptake is expected to be fuelled by tax exemptions and import duty waivers on green building materials and services.
Besides incentives, the adoption of green building concept as a means to sustainability depends on the regulatory framework, and associated policies. Inaccurate perception of high upfront costs and price competitiveness are the main market challenges. Hence, affordable green building technologies will be an enabler for the expansion of the green building market.
Identifying key trends or opportunities in each country is vital for success in this market. For instance, China is emerging as a leading solar photovoltaic manufacturer with local brands dominating the market. Rainwater harvesting systems in buildings and rooftop landscaping are hot areas in Singapore, while BIPV is expected to get the spotlight in Malaysia.
Melvin Leong is a research manager for Asia Pacific, Environment & Building Technologies at Frost & Sullivan