Green buildings are creating new business opportunities and transforming the construction and engineering scene. Oswald Chan reports from Hong Kong.

Green buildings are known for their environmentally-friendly features that can cut carbon emissions by optimizing energy usage.

One example is the district cooling system. Power used for chilling and air conditioning can be reduced by replacing traditional air conditioning systems with chilled beam solutions, under which chilled water is passed through tubes in a building, cooling the surrounding air and promoting airflow as warm air rises to replace the chilled air. This method is particularly energy-efficient when carried out on a large scale.

In Hong Kong, a district-wide seawater cooling system is used in developing the site formerly occupied by Kai Tak Airport in Kowloon City - a technique that could cut annual electricity consumption by up to 35 percent, compared with the conventional air conditioning system. Two other district cooling systems are set to be installed at Tung Chung on Lantau Island and Kwu Tung North in the northern New Territories. The Hong Kong Special Administrative Region government may also incorporate similar cooling systems in more new development areas, such as Hung Shui Kiu in the western New Territories, Ha Tsuen in Yuen Long, and on the artificial islands in the Central Waters (between Hong Kong Island and Lantau Island).

Modular integrated construction is a method whereby free-standing integrated modules (with finishes, fixtures and fittings) are manufactured in a prefabrication factory before being transported to project sites for installation, making the construction process much quicker, less intrusive to the environment and more sustainable.

Developers and building owners can also try to reduce carbon emissions through replacement, retrofitting or retrocommissioning. Replacement will make existing equipment more efficient, while retrofitting helps to cut carbon emissions by changing the system design. Retrocommissioning is improving and optimizing the operation and maintenance of building equipment and systems to save overall energy consumption.

Buildings are the largest sources of carbon emissions in Hong Kong. About 66 percent of emissions was attributed to electricity generation in 2019, with buildings accounting for about 90 percent of the city's total electricity consumption, according to the SAR's Climate Action Plan 2050.

Commercial and residential buildings accounted for 66.9 percent and 26.6 percent, respectively, of power consumption in the same year. The remaining 6.5 percent came from industrial buildings and transport.

In its green building report, global real estate advisory firm Jones Lang LaSalle says the property sector is responsible for nearly 40 percent of global carbon emissions (as much as 60 to 70 percent in some cities), making it essential for the industry to respond to the clarion call to lower greenhouse gas emissions.

"It's fair to say Hong Kong has been fairly late in the game of green building technology, while other cities are already ahead, particularly places like Singapore and European cities," notes David Faulkner, president of the Urban Land Institute Asia Pacific - the world's largest network of cross-disciplinary real estate and land use. "Hong Kong ought to be a market leader in green building technology as the city is a great laboratory for high-density living," he says.

To cut carbon emissions, the SAR government has made reducing commercial buildings' electricity consumption by 30 to 40 percent its long-term goal, and aims to lower energy use in residential buildings by 20 to 30 percent by 2050. It pledged to bring down total carbon emissions in Hong Kong by as much as 36 percent before the end of this decade. In 2020, carbon emissions were about 20 percent lower than the 2005 baseline, according to the Climate Action Plan 2050.

Growth opportunities

Making Hong Kong buildings more energy efficient by slashing the carbon footprint offers a significant opportunity for the private sector, particularly in retrocommissioning, energy auditing, green building certification compliance and technology collaboration. This will create new business value chains, with implications for future talent requirements.

The value chain of green buildings will involve upstream segments, such as project owners and financiers, environmental consultants, technology vendors, as well as material providers. The downstream sectors will include tenants, occupiers, property management companies and service contractors.

"Retrocommissioning provides a huge growth market for engineering advisory firms in helping to put Hong Kong on the path to a greener environment. It is really the optimization of the buildings that we have," says Axel Kurschat, strategy and operations director at KPMG China's Government and Infrastructure Advisory.

He says environmental and mechanical engineering expertise, such as thermal dynamics and fluid engineering, digital capabilities in computer science, and environmental, as well as social and governance knowledge, are deemed to be the new skillsets for a green building professional of the future.

"The long-term value is that it (retrocommissioning) can transform the industry from experience-based energy management to knowledge-based data management. The retrofitting market is very large, involving talents, service providers, energy and environmental consultants, architects and technology vendors," says Cary Chan Wing-hong, executive director of the Hong Kong Green Building Council.

"First, our vision is to take retro-fitting into the mainstream. Second, we will try to match building owners and technology providers in piloting those new technologies in some buildings to promote the early adoption of retrofitting technologies," he says.

According to Chan, about 90 buildings in Hong Kong had undergone retrocommissioning from 2016 to 2019, but it is estimated there are more than 42,000 existing private buildings in the city. So far, 1,200 retrocommissioning professionals and practitioners have been trained, with 400 of them and 11 service providers registered.

Energy auditing, like health checks on buildings, will be another major potential growth area. "The government should consider granting financial subsidies to developers to carry out more energy audits," suggests Mark Cameron, head of energy and sustainability at Jones Lang LaSalle, Asia Pacific. "A professional energy audit should come up with a comprehensive energy-saving performance report on each building, and developers should be advised on how to further improve energy-saving."

"When you cannot measure, you cannot improve. With energy audits, it is important to find out which areas can be improved on by benchmarking what we have. The profession can thus grow," Kurschat believes.

In Chan's view, how effective an energy audit could be would depend on how frequently it is conducted, and whether building owners would adopt the measures proposed after the audit. The HKGBC has set up a database for measuring the energy intensity of buildings (energy consumption per square foot). The council plans to launch a benchmarking scheme next year to rank buildings' energy performance based on their energy consumption data.

'Transitional stage'

Meanwhile, in developing the business value chain for green buildings, the government should offer more incentives to developers and building owners to obtain international green building certification.

According to KPMG's smart city report, only 2 percent of privately-owned buildings in Hong Kong currently carry a BEAM Plus certification, bronze grade or higher, from the HKGBC. The BEAM Plus standard examines the environmental quality of a new building project, covering the demolition, planning, design, construction and commissioning stages.

Local developers just comply with the minimum requirements of the BEAM Plus standard to secure gross floor area concessions, and the government thinks that just complying with the standard is adequate, according to Cameron.

Cameron says the government should offer easier access to capital for developers and building owners to start a green project if they comply with the Leadership in Energy and Environmental Design (LEED) system and WELL Building Standard. "The point is to create niches in operating buildings for developers and owners that have obtained accreditation. They can have lower operation costs and hence boost return on investment," he says.

Another point is that when developers and building owners can get capital to initiate green building projects, it will give technology startups more opportunities to scale up their operations.

The government can consider levying a carbon tax on developers or building owners if they adopt building materials or electrical appliances that are not energy-efficient. Legislation could also be introduced, requiring developers and building owners to meet the carbon-emissions quota of each building as stipulated by the government. "This will have a chain effect on boosting the demand for more green building technology solutions when green procurement becomes more popular," says Cameron.

According to real estate economists Ben Dalton and Franz Fuerst, green certifications could draw a rent premium of 6 percent and a sales premium of 7.6 percent. From raising capital to making buying or selling decisions, underwriting, and resilience planning, exposure to climate change will affect every part of the real estate asset class' life cycle in cash flow, capitalization rate and financing.

Jones Lang LaSalle estimates that 50 percent of all investment properties in prime locations across the Asia Pacific are more than 20 years old, with $40 billion in value tied up in aging or underperforming properties. It also found that rental rates were up to 40 percent lower for aged and outdated buildings, compared with up-to-date and well-managed properties in similar locations.

Technology collaboration between the HKSAR and other Guangdong-Hong Kong-Macao Greater Bay Area cities is essential for promoting green buildings. Sensors, internet of things, artificial intelligence and big data analysis can be used to monitor and optimize buildings' energy usage.

"There is a natural synergy. Shenzhen is very strong in new technology in the operation and management of buildings. But Hong Kong has real estate expertise in building investment and management. Hong Kong has many technology startups, but lacks the scale of technology companies Shenzhen has. That would be the great opportunity for both cities to work together," Faulkner reckons.

"Hong Kong should embrace the Greater Bay Area's advantages by sharing information and adopting technologies on a much larger footprint. The city-cluster area provides the testing field for this," says Kurschat.

In his opinion, energy audits can be conducted in many new buildings across the Greater Bay Area. The region also has more space to produce modules and conduct quality tests on them, as required in modular integrated construction technology.

"I would describe the present stage as a transitional stage where a lot of buildings are piloting the use of IoT and AI. What the HKGBC would work on is mainstreaming the adoption of these technologies," says Chan.

He notes the SAR government's significant role in shaping the value chain of the construction industry. "The Inland Revenue Department has offered profits tax concessions for developers that invest in green equipment in buildings. The Architectural Services Department and the Housing Department can directly influence what is being built through the public procurement of buildings and infrastructure."

The government can also regulate the construction sector with tools, like building energy codes, energy labels for appliances, as well as land lease/planning requirements, in key growth areas, says Chan.

Contact the writer at oswald@chinadailyhk.com