The Diplomat - Bucharest interviewed visible players on the real estate market - consultants, developers, funds and influencers - in order to find out the current status of green real estate business in Romania
Cities are responsible for 75 per cent of overall global energy consumption and for 80 percent of carbon emissions. These are argument enough to underline the challenge of energy-efficient construction in all markets. In the EU, 40 per cent of energy consumption is achieved by buildings, while in Romania the percentage is 45 per cent, according to data on the market. The objective of reducing this percentage is not only something to check in companies' sustainably plans but it also means a significant added value in the real estate deals.
A recent statement of Saint-Gobain company referred to the fact that "more than half of the global population lives in cities, and the number is constantly increasing, which could affect climate. Thus, the most important cities in Romania, as in the world, began to build eco-friendly buildings adapted to the environment. It is no secret that the percentage of those living in cities will reach 66 per cent by 2050, compared to 54 per cent in 2014," the company representatives stated. "We are determined to improve the energy efficiency in factories and in our manufacturing processes. Direct carbon emissions are the result of fossil fuel combustion and chemical reactions that occur in manufacturing processes. Optimizing existing equipment, more efficient combustion processes, maximization of the recovery of heat from furnaces, and using equipment efficient in terms of energy led to real progress," said Constantin Hariton, delegate deputy general manager of Saint-Gobain Romania.
The next step in this industry is to construct buildings that produce no emissions, according to Saint-Gobain representatives. "Architects and construction companies will have the chance to highlight their special ideas adapted to the environment for future eco-friendliness. They will also address such issues as reducing energy consumption in buildings, reducing carbon emissions associated with the production of construction materials, and encouraging cities to opt for a more integrated approach in terms of building design and urban planning. Also, they will try using local materials that consume less energy and transport," according to the company statement.
The issue of sustainable and energy-efficient buildings is not only a matter of marketing the residential and non-residential projects (especially commercial), but is actually a clause included in different EU-drafted accords and programmes. For instance, in 2005 the European Commission launched a programme called GreenBuilding Programme (GBP). GreenBuilding is a voluntary programme aiming at improving the energy efficiency of non-residential buildings in Europe on a voluntary basis. The programme advises owners of non-residential buildings to realize cost-effective measures which enhance the energy efficiency of their buildings in one or more technical areas. The programme covers both existing and new buildings. After eight years the GreenBuilding Programme reached its original target of collecting data from over 1,000 buildings. "The goals of substantially improving end-use energy efficiency and promoting the use of renewable energy sources are key components of the EU energy and environmental policies shared by all EU Member States. The European Commission Directorate of General Energy and Transport contributes to this goal through a series of actions under the "Intelligent Energy - Europe" Programme. In addition, given the large share of energy consumption in buildings and the large cost-effective energy saving potential, special attention has been dedicated to the building sector. To this end a major step forward is Directive 2010/31/EU on the Energy Performance of Buildings," the programme description reads. So, in 2014, a report has been issued, comprising 1,000 buildings all over Europe that met the generally-known green features, mostly referring to energy efficiency. Though at that time Romania was not represented by any building, in the meantime several significant green - certified and awarded projects started to populate the Romanian real estate landscape, mostly in the office sector.
Recently, ESOP issued a study stating that 2016 may be the first year of giving up low-quality offices in Bucharest. Fewer company headquarters will be located in old communist apartment houses, in earthquake-unsafe areas or in buildings not protected against fire. "Several factors with major influence on the office market will gather in 2016. There will be migrations in all office market segments in Bucharest, on the background of increased office offers: big company tenants will consolidate headquarters in the newest and best-located office buildings in centre-northern and centre-western areas. Medium size companies will take their place in smaller central buildings erected in the last ten years, renting offices of 500 to 2,000 sqm. For companies with less than 50 employees there will be several modern office variants such as instant offices, business hubs, offices in small or middle size centres with more affordable rents. The migration of companies with less than 50 employees from apartment houses will take place because of higher tax on properties for these buildings and the possibility of rent increase and harsher laws on quake risks and norms against fires."
The residential sector also enrolled more strongly in the sustainable trend, also due to the fact that it was very well promoted in media - through different case studies, but mainly through the Green Homes programme initiated by RoGBC and other similar activities. "More experienced developers are turning to international certification schemes, which are more thorough and benefit of higher expertise and credibility - such as BREEAM, whose dedicated methodology for the residential sector, launched in 2013, is increasingly popular among professional market players," according to Razvan Nica, managing partner of BuildGreen Romania, a company specializing in BREEAM, BREEAM in-Use, RICS SKA- Rating and LEED certification consultancy services.
Incentives for green
The real estate market has become more and more demanding in terms of the quality and efficiency of the buildings that are being developed. According to the Romanian Green Building Council, in the last five years, the number of constructions that have or are trying to obtain a green certificate has increased from two buildings a couple of years ago to 20 at a local level, according to a statement from AFI Europe Romania. AFI is also a local developer with green building projects developed in Bucharest, with the first green certification for an office building achieved in AFI Park 1, followed by the LEED Gold certification for AFI Park 2 and now for AFI Park 3.
Bucharest is the leading city in Romania in adopting green standards, but other cities in the country, such as Cluj-Napoca or Timisoara, are also trying to adapt to these requirements. At the national level, the Romanian Green Council Building (RoGBC) mentions that there are over 20 green office buildings in three major cities: Bucharest leads with 16 projects, followed by Cluj with four buildings and Timisoara with one.
Steven Borncamp, CEO & Founding President of RoGBC told The Diplomat-Bucharest that another increase had been seen recently in the targeted green performance of investors - particularly in commercial office space - with projects under works that are intended to achieve the highest possible certification. "The business case for building green has also been firmly established with higher occupancies and higher sales prices of buildings for these types of projects. We also saw some really fantastic deep green residential projects come onto the market - some already achieving the ambitious European â€²Net Zero Energy Buildingâ€² legislation that will come into force in 2020 - and much more is in the pipeline," Borncamp said. "For all building types, I would say â€²bioclimatic designâ€² - designing to utilize the benefits of nature - is the most significant development for all building types. Offices have been focusing more on providing more natural daylight and healthier indoor air quality. Existing industrial buildings are being converted into some very innovative and attractive residential, office, retail and entertainment spaces," the manager added. But Romania still has to a lot to catch up with in other developed markets. "Our stock of existing buildings is performing far less in terms of providing energy efficiency, quality, safety, comfort and healthy, productive spaces. That said, the industry - represented by both Romanian and international investors - has in recent years enthusiastically embraced the green approach for all new-build and deep-renovation projects. I also see very promising signs in the public sector with the new government across multiple Ministries and agencies looking to improve how buildings will be constructed or renovated in the near future," Borncamp added.
Skanska Property Romania: For buildings, healthy will become the new green
"The state should involve more", "inexistent dialogue with authorities", "the ignorance of official local administrators," are often the openings of sentences addressing at least a part of the problem that holds back a potentially large development of green projects all over Romania. According to the RoGBC, the most powerful incentive tool regarding the residential sector is the green finance. Romanians, like many in the region, have significantly under-invested in the creation and renovation of their homes leading to higher operating costs, higher repair costs, and reduced home valuations. Banks can lower the borrowing costs offered to homebuyers through "green mortgages" as their risk is substantially reduced when they finance green homes. Homeowners can have far superior homes with a lower monthly total cost of ownership realized immediately in smaller energy payments, better use of space, and other green building benefits. "Our organization has created a green mortgage programme and related guide for investors, green building solution providers, and homeowners to realize this â€²win-win-win-winâ€² scenario. Weâ€²ve now reached 4,300 residential units being certified or pre-certified in the programme and we predict substantial growth in the programme for 2016," Steven Borncamp said.
On the other hand, on the commercial side, according to Borncamp, a very effective tool for municipalities is to introduce property tax reductions for buildings achieving top levels of green performance. "Investors choosing to build or renovate to a high green standard create buildings that provide significant community benefits including reduced traffic, less toxicity, and less environmental degradation. Innovative tax policies will help Romania prepare for Europeâ€²s green, low-carbon direction while creating significant business opportunities. Cluj and Timisoara have already implemented programmes in this direction and many more municipalities are interested," the RoGBC manager added.
According to Paul Heroiu, head of Project & Development Services at Jones Lang LaSalle, only one city in Romania (Cluj-Napoca) offers facilities for green developments. "This model proves to be a successful one and even smaller developers are starting to build certificated projects. This kind of approach of the local authorities should be adopted by the other major cities, especially Bucharest. Facilities could include, beside a tax reduction, a long term strategy by the Romanian authorities to encourage the development of green buildings through grants (supported also by European Funds) or even better financing conditions for environment friendly projects," the JLL manager said.
AFI Europe Romania: Green demand, green supply
It is the belief of Marcin Lapinski, managing director Skanska Property - Romania and Hungary, the company who delivered Green Court Bucharest to the Romanian market. In 2015, Skanska won Green Project of the Year at CIJ Awards Romania with their first project in Romania, Green Court Bucharest, a LEED (Leadership in Energy & Environmental Design) certificate on the Gold level.
Green Court Bucharest's Building A is expected to make annual financial savings of around 33 percent throughout its lifespan through its efficient use of energy and water. According to the developer, its design provides a healthy working environment and lowers costs due to modern features and space layouts. Also, Green Court Bucharest is one of the first buildings in Romania with power supply sources for electric cars.
Reasons to go green? To list only a few, quoting the Polish developerâ€²s statement: responsibility for the environment, the business benefits of the clients, lower operational costs and a healthier working environment. According to Lapinski, the "green" concept in business means energetic efficiency and lower resources consumption. A green building can save 30 per cent of its operating expenses. As stated by Skanska's officials, the most important novelties brought by the green buildings are also defined as the benefits for a green life: LED-based systems for more efficient lighting, energy efficient facades, water efficient fixtures, low-emissions materials and other innovative technologies, both user and environment friendly.
"Over the past 20 years, green construction has gone from a niche enterprise to a major driver of new business. It is necessary and feasible for businesses to measure the impact of their buildings on their employees. Investors need to ensure that elements such as indoor air quality (ventilation and thermal control), light quality, acoustic comfort, spatial configuration, view out and access to amenities are adequately addressed," Lapinski told The Diplomat-Bucharest. From 2015 to 2018, the green building sector is expected to support more jobs, bring more money to industry workers and also add to the GDP. This will mean more business. So it is important that communities understand the benefits of green buildings and that authorities encourage investments, support business community and attract investors. The aim is to raise business awareness of the positive impact sustainable buildings have on people and the possible financial benefits," the manager added.
BuildGreen: 2015 was definitely the year which cleared all uncertainties regarding green certification
According to AFI Europe Romania representatives, all office buildings should include a series of technologies designed to make them green, such as: LED lighting, advanced chillers and boilers that reduce energy costs, usage of rain water for the green areas and access to daylight through the incorporation of vision glazing. In addition, office buildings can have sensors installed to shut off unneeded usage of electricity. The math says that all the facilities mentioned above generate on average an about 40 per cent lower operating consumption. This is the case for AFI Park's tenants in terms of electricity and water compared to a regular office building. Also, another feature of a green building is the location that offers easy access to public transportation, encouraging tenants to be environmentally responsible and to use buses or bicycles. "AFI Park was developed to have a low impact on the environment, with the nearby subway station Politehnica, only 200 meters from the project, in addition to 12 different bus and tram lines that are serving the business park. We plan to develop the shopping mall in Brasov to be LEED Gold certified, as all of our future projects. The commercial centre will be situated in the centre of the city and the business district in Brasov (Centru Civic) and will have a gross leasable area (GLA) of 45,000 sqm spread over three levels," AFI Romania's representatives told The Diplomat-Bucharest.
For this year and in following years, AFI representatives said that the trend is rising in terms of green developments in Europe and Romania, considering that the EU has set itself a 20 per cent energy savings target by 2020. "Through an Energy Efficiency Directive that entered into force in December 2012, the European Union set out binding measures to help reach the established target. The document includes measures that, for example, require national governments to carry out energy efficient renovations on at least three per cent of the buildings they own and occupy every year, and a provision for large companies to carry out regular energy audits. In the long term, this will bring about a better quality of life for all European citizens. An utmost important factor is the incentives that should be received from the authorities for green projects. Such incentives are mainly in the form of lower building tax for green buildings," the officials of AFI Europe Romania said.
Genesis Development: The lifecycle approach in operating green buildings
As Razvan Nica, managing director of BuildGreen company stated, "if there was any doubt left that the certification of sustainable buildings is a â€²mustâ€² for all class A-offices, 2015 was definitely the year which cleared all uncertainties." According to BuildGreen data, a massive number of projects, including virtually all new class A-constructions, conducted certification processes last year. This is valid for Bucharest and all the major cities, such as Cluj-Napoca, Timisoara, Brasov or Iasi. "BuildGreen, for example, was involved in over 20 certification projects, significantly more than in previous years. This result is directly connected with the recent boost on the development side, but it is also a sign of the increasing role sustainability plays in the design, construction and management of successful projects," Nica said. "I think that the market is mature enough now in order to understand that the certification (LEED or BREEAM) is not an end in itself, but rather a management tool that, used properly, guarantees the achievement of the required quality performance. The life cycle approach is one of the most important issues that a project team should consider. Basically, this includes all energy performance and sustainability criteria, linked together with long-run quality criteria. Our strong recommendation is that any design decision to be taken should also consider the long-term impact, not only the initial construction budget," Nica told The Diplomat-Bucharest.
Also seen in the number of developments in terms of green, the Romanian green building market in recent years has been very well supported by the local authorities in major cities such as Cluj-Napoca and Timisoara, through incentives that help developers incorporate the sustainability trends into their projects. "From my point of view, this practice should be encouraged all across Romania, along with a better education of the market and with some robust selection criteria, in order to avoid any potential fraud attempts which generally appear where there is financial benefit," Nica concluded.
Jones Lang LaSalle: the criteria for obtaining green certificates are becoming stricter
The green building approach has become a standard nowadays, as the result of the past decade's development boom and the years that followed. What was seen as extravagant or "luxurious" five years ago is now a norm that all office building developers and owners need to apply to their businesses. "We at Genesis Development are in a constant state of improvement of our services, as well as the working conditions and facilities we provide, as a direct result of the discussions with our tenants. Both tangible and intangible issues contribute to the tenants' satisfaction and this is why energy and water consumption, as well as monthly rents and lease renewals are equally important when setting the business plan for the years to come," Liviu Tudor, president and founder of Genesis Development told The Diplomat-Bucharest.
Genesis Development is the owner of the two office parks in western and northern Bucharest, West Gate and Novo Park respectively. The latter consists of seven buildings of class A office spaces, and is located next to the Pipera subway station. Novo Park has a Very Good BREEAM certification. "Our philosophy is to develop new office spaces as the tenants express their need for it, and to manage the buildings in the best environmentally-friendly way. Thus, we provide sustainable and energy efficient building operations, according to the â€²life cycle approachâ€², that initially brings higher costs, but which are later absorbed through lower operations costs. This approach also contributed to the BREEAM certification process of the office buildings," Tudor said. "We have several actions as part of our Eco & Energy Saving programme at Novo Park and West Gate. We recycle as much as possible, from all sorts of technical equipment, to batteries, economic light bulbs and paper, just to name a few," the Genesis manager added.
Colliers: The role of the green certifications consultant sees wider attributions
According to Paul Heroiu, head of Project & Development Services at Jones Lang LaSalle, almost one-third of the existing stock of office buildings in Bucharest has any form of green certificate (LEED, BREEAM). Moreover, close to 80 per cent of the buildings which are currently under construction are built according to international green standards. "This is a solid proof that developers present on the local market are eager to provide quality and sustainable products and align themselves to the international trends. However, more recently the criteria for obtaining such green certificates are becoming stricter, evolving at the same time with both new technologies and building materials," Heroiu told The Diplomat-Bucharest. The manager gives the example of one of the buildings in JLL's portfolio, the Gara Herastrau office building, developed by Globalworth. "The developer aims to offer a high-quality sustainable construction and to certify the building as a green-sustainable one. The goal is through sustainable building to reduce material consumption and long-term costs in order to make the asset more attractive to the clients or tenants and to raise the value of the business," Heroiu added. In order to catch up with the current demand, the existing buildings which were lacking any form of green certifications are now reassessed and refurbished to respond to sustainable requirements. The owners of these buildings understand that in order to be more competitive, they need to align to the latest standards, otherwise risking losing their tenants to other, more efficient buildings, according to the JLL manager.
Portland Trust: From nice-to-have to must-have green certifications
More specifically, the consultant in green certifications sees an expansion of his attributions, as Oana Stamatin, LEED AP BD+C senior associate, Real Estate Management Services, Colliers International told The Diplomat-Bucharest. "If, until now, the green certifications consultant was a discreet presence at the meeting of project managers related to a construction development, with several clear and limited attributions mainly concerning the confirmation or rejection of several solutions and materials, starting in 2016, his role sees a repositioning. The Integrated Design Process becomes more popular, being successfully integrated in various projects. The main benefit, versus traditional methods, is that the integrated design process includes from the very beginning the sustainability aspects of all the construction process levels. The outcome is that the certification objectives are met and reasonable construction costs are kept," Stamatin explained.
If we are to compare the markets in terms of green-certified buildings, Romania lags behind other European states. "However, the market developed significantly in the past four years, when the first green certificates were implemented locally but the growth pace is still slower compared to other countries in the region," the Colliers specialists added. This is also because "compared to Romania where two major certifications are met, respectively LEED and BREEAM, other countries have some certifications developed under their own national schemes, such as: DGNB and Passivhaus in Germany, OGNI and DGNB in Austria, HQE in France, CasaClima in Italy, Valideo in Belgium or Lider A in Portugal," Stamatin explained.
Veranda Mall: Green, an incentive for financings
Portland Trust, commercial real estate developer and asset manager, with several visible office projects in Bucharest such as Floreasca Park (certified BREEAM Excellent), Floreasca 169A, Bucharest Business Park, Opera Centre and the most recent Oregon Park where the first two buildings are to be delivered this year, has a strong regional and global expertise in green certification buildings. Florin Furdui, country manager at Portland Trust Romania for more than seven years, has witnessed firsthand the local emergence of green certifications for buildings locally. "Only several years ago, the green certifications were something exotic, a rare appearance in the local landscape, a â€²nice-to-haveâ€². Today, following the continuous process of local market evolution, the green certifications (LEED and BREEAM) inherently became a â€²must-haveâ€², not because they are enforced by a general rule but, mostly, because they are a negative differentiator in terms of project selection by tenants," Furdui told The Diplomat-Bucharest.
The stronger emergence of green certifications in Romania comes also as a natural follow-up to local demand. "The tenants are educated in terms of green certifications, moreover, the multinational tenants are most likely to look for a green-certified building for their offices. The local market belongs to tenants at this point and in my opinion it is not the green certification that makes the difference, but the outcome of this certification in the eyes of the tenants, specifically the energy efficiency benchmark," Furdui explained.
Regus: The future of the work environment means efficient resource management
Andrei Pogonaru, development manager of Veranda Mall, a shopping centre to be developed in the Bucur Obor area of Bucharest, underlines the investors' interest in developing greener projects: "A novelty in 2015 has been the larger flexibility of banks to offer financing to green projects. Last year was the first year to observe that banks have decreased the interest to financings of green projects, be they retail, office or residential," Pogonaru told The Diplomat-Bucharest.
Also, according to the manager, a trend coming from the US markets started to emerge locally in the development of green buildings. "The carbon-neutral building development becomes more popular in Europe. These buildings are not only energy efficient but they reduce their â€²carbon footprintâ€² by using natural energy resources," Pogonaru added. This kind of development includes the entire process of sustainable development, starting from the used construction materials to different recycling methods. According to Pogonaru, green development is currently exclusively a matter of sales and marketing the projects, rather than of legislation or regulation.
Lately, the trend of developing and approaching green projects has emerged at the global scale. The eco principle refers not only to minimise the pollution factor but to efficiently resource management and savings. The latest office centre launched by Regus in June 2015 meets the market demand and the current trend of tuning the urban projects to a nature-friendly environment, especially when it comes to busy cities such as Bucharest. The capital has a 41 per cent cluster level and according to statistics, a typical motorist loses an average 103 hours per year in traffic. "In a mobile world such as ours, a more productive way to work is to access the offices located in the neighbouring areas of home environments. Regus, London Stock Exchange-listed, founded in Belgium in 1989 and with its HQ in Luxembourg, developed several solutions that convey efficiency in terms of space and cost by creating virtual offices, co-working spaces and business lounges. Compared to a classic office, a common space for work or a virtual office results in reduction of costs, lower resource spending and an environment-friendly space."
Such offices, either virtual spaces or common working environments and business lounges are available in locations in Bucharest. Globally, Regus operates 2,600 such locations in 900 cities in 106 countries, with clients such as Google, Toshiba and GlaxoSmithKline. These kind of projects are seen not only as "offices outside the offices" but as excellent spaces for networking. The co-working concept is not new, but Romania has only adopted it in the past few years. "Sharing the work spaces with other business people results not only in efficient resource intake but the opportunity to create new business links," Regus representatives said.