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The Greening of China's Building Industryby Kenneth Langer and Robert Watson 
Tiger (Tai Ge) Service Apartments, Shenzhen
The World Bank estimates that between now and 2015 roughly half of the world's new building construction will take place in China. The vast majority of these projects are large—commercial office buildings between 100,000 and 150,000 m2 and residential developments that span more than 500,000 m2 of construction area. China's entry into the World Trade Organization and its subsequent investment boom is spurring new real estate development across the nation, and Beijing's successful bid for the 2008 Olympics will result in billions of dollars in new construction in the capital. China's Ministry of Construction (MOC) estimates that China will add 2 billion m2 in new construction in 2005 and will double its current building stock by 2020. Different Standards, Different CostsEnvironmental Market Solutions, Inc. (EMSI) recently compared four technology scenarios for the Shanghai-based Skyway Oasis Hotel project: the original design case, the new Shanghai energy code for public and commercial buildings, the budget model using standards set by the American Society of Heating, Refrigerating, and Air-Conditioning Engineers (ASHRAE), and EMSI's high-performance or green scenario. The results show that there is virtually no difference (less than 6 percent) in energy cost under the project's original design and under the Shanghai code ($246 and $232 per m2 a year, respectively). Under the ASHRAE budget scenario, the building's energy bill drops 17 percent to $204 per m2. The high performance scenario, developed and recommended by EMSI, projects annual energy cost at $144 per m2—a 41 percent savings over the original design. —Kenneth Langer and Robert Watson To most real estate developers caught in this gold rush, the game is about constructing mediocre buildings as quickly and profitably as possible. But a group of progressive developers are designing and building China's first green building projects without compromising the bottom line. Compared to conventional buildings, green buildings consume less energy and water, preserve natural resources such as land and materials, and provide excellent indoor environmental quality. These objectives are achieved largely through integration of four elements:
Equally important is the process of evaluating the impact of architectural features, materials, and mechanical systems. Green building consultants can quantitatively assess the technical and commercial viability of recommended strategies and products, allowing developers and owners to make design and procurement decisions based on the extra cost of "green" features, payback period, and net present value of future savings on operating costs. Driven by government concerns about pollution, resource depletion, and energy deficits, and the desire for international recognition (Beijing's commitment to a Green Olympics was a strong selling point in its proposal), a green building industry is emerging in China, offering promising commercial opportunities for US businesses. 
Green Building Trade AssociationsVoluntary, public-private organizations have been instrumental around the world in developing green building standards and setting the stage for market transformation. China is no exception; several local-level, and one national-level, green building councils are being formed. China Intelligent and Green Building AssociationIntelligent buildings use integrated control and security systems and incorporate high-speed Internet connectivity, among other features. In Beijing, the Ministry of Construction (MOC) is developing the China Intelligent and Green Building Association (CIGBA), which will be the world's first organization to integrate these two vital trends in buildings. CIGBA will provide vital national coordination and leadership as China's building industry moves into the twenty-first century. CIGBA is planning the First International Conference on Intelligent and Green Buildings for March 28-30, 2005 at the Beijing International Conference Center to inaugurate the organization (www.sigbac.com). Shanghai Green Building CouncilThe nation's first officially recognized group promoting green buildings, the Shanghai Green Building Promotion Council (SHGBC) was approved in September by the Shanghai Bureau of Civil Affairs. It was launched on September 22, in conjunction with the Sustainable Building 2004 conference in Shanghai. SHGBC will work with the World Expo planning committee to develop a Shanghai-specific green building certification system, most likely by adapting Leadership in Energy and Environmental Design (LEED) standards or the Olympic Green Building Assessment System developed by Qinghua University. Chongqing Association of Energy Efficiency in BuildingsChongqing initiated its Association of Energy Efficiency in Buildings (AEEB) in 2003. The association has made significant efforts to promote consumer awareness of energy efficiency and MOC's "3-A" construction quality standard for residential buildings, which also incorporates energy efficiency and other environmental features. AEEB is considering expanding its role to encompass a broader green building mission. Potential Guangzhou and Shenzhen associationsThe Guangzhou Real Estate Association, in partnership with the progressive China Merchant Real Estate Co. Ltd., has expressed interest in forming a South China green building council. Another group, in Zhuhai, is working with various local refrigeration associations to assess the idea of a South China Green Building Association that would develop a "Chinese LEED" certification and be a part of the World Green Building Council. Like SHGBC, this group will promote sustainable building practices and technologies through a variety of programs. —Kenneth Langer and Robert Watson A new government priorityFor most of the last 20 years, the government's top priority has been economic growth. But in the last few years, environmental degradation has become so severe that, in some areas, it threatens to undermine economic growth. China's State Environmental Protection Administration (SEPA) estimates that damages from pollution total nearly 10 percent of annual GDP. Though much of this pollution stems from increased manufacturing for the domestic and global markets, China's rising demand for electric power, which is predominantly fueled by coal, is a growing factor. Electricity production accounted for 34.2 percent of China's air pollution last year. Water, too, is short in two-thirds of China's cities, with less than half of the water fit for human contact. Environmental problems have prompted national, state, and local governments to emphasize environmental protection. Environmental problems have prompted national, state, and local governments to emphasize environmental protection. China budgeted $84 billion for environmental projects in the current five-year plan (2001-05). Shanghai's annual budget for environmental protection is a healthy 3 percent, and Beijing has allocated roughly $12 billion for environmental projects in preparation for the 2008 Olympic Games. These funds accompany a host of new government initiatives—research into new technologies, creation of green product certification and labeling programs, demonstration projects, and a flurry of green building seminars across the country. Shanghai, in preparation for the 2010 World Expo, is planning to move or overhaul hundreds of factories, residential housing, and other buildings to meet environmental codes. The municipal government has also established the Shanghai Green Building Council (see Green Building Trade Association) and has hosted three international conferences on green construction in the past half year alone. Certain progressive cities are beginning to offer financial incentives to developers that use energy-efficient building technologies. For example, the Shenzhen municipal government recently announced interest-free mortgages for hotels that install thermal ice storage systems—a technology that shifts energy consumption to off-peak hours. These measures send a strong signal to real estate developers that the government is beginning to throw its weight behind environmental protection. With few exceptions, neither national nor local governments are currently offering tax breaks or other incentives. Nevertheless, Chinese real estate developers are showing increasing curiosity (if not interest) in green building technology. Undergirding the genuine interest is a practical consideration: Responding to governmental priorities can only help developers who are constantly seeking land concessions and building approvals, uninterrupted electric power, and other benefits. Green Building Case StudiesCentury Prosper CenterA 150,000 m2 twin office tower under construction in Beijing's central business district, developed by Fountainwood Real Estate Co., Ltd.
Annual energy savings: 12 million kWh Le Sang Estate Shopping MallAn 80,000 m2 retail development in the northeastern city of Harbin, Heilongjiang. Developed by Hadian Real Estate Development Co., Ltd., a subsidiary of Harbin Power Equipment Co., which is China's biggest manufacturer of large steam turbines. Tiger (Tai Ge) Service ApartmentsA 28,000 m2 high-end residential development nearing completion in the Shekou district of Shenzhen, developed by China Merchant Real Estate Co.
Annual energy savings: 1.3 million kWh Skyway Oasis (Jin Yulan) Hotel and ApartmentsThe Skyway Oasis Hotel is a new 80,550 m2, five-star hotel and apartment building, developed by the Shanghai Real Estate Co. Ltd., that will incorporate meeting and seminar spaces, a large spa and gym, and a restaurant. The project is expected to be the first LEED-certified building in Shanghai, with a projected 39 percent energy cost reduction.
Annual energy savings: 6.8 million kWh Harbin Songbei District Municipal BuildingA 70,000 m2 municipal building for the new Songbei district of Harbin. This is expected to become the first high-performance government building in China. The project team, consisting of New York-based Kiss+Cathcart Architects, Toronto-based Enermodal Engineering, and EMSI Beijing, has introduced advanced green building strategies, including natural ventilation through the use of temperature-stabilizing heat stacks, and summer cooling through winter ice storage. Stages of certificationWith the exception of Harbinšs Songbei District Municipal Building, which is not pursuing certification, all EMSI projects are registered for LEED and in various stages of the application process. In addition to these EMSI projects, Shui On Properties, a subsidiary of Shui On Construction & Materials Ltd., is developing Xihu Tiandi, a multi-use, leisure-and-lifestyle development in the historic district of Hangzhou, Zhejiang. UK-based Arup Group Ltd. is the engineering and green building design consultant for this project, which will likely garner the LEED platinum rating. —Kenneth Langer and Robert Watson Changing codes and standardsMarket transformation involves the development and implementation of a regulatory "push" through the establishment of mandatory minimum performance standards and a complementary "pull" from market-based mechanisms. The first stage of market transformation is the establishment of a regulatory framework of mandatory codes and standards. In 1986, China's MOC issued an energy-saving code for "cold and severe cold" climates, beginning a two-decade effort to develop codes and standards for building sectors in disparate climates (see Figure). The commercial code, expected in 2005, will set rules for each of China's climatic regions. The code will require greater insulation in the walls and roof, as well as double-glazing and insulated window frames in certain climates. Lighting energy limits will be between 8 and 15 watts per m2 depending on the type of building. Heating, ventilation, and air conditioning (HVAC) systems will have to be significantly more efficient. China's codes and standards, which are prescriptive and performance based, aim to reduce energy consumption by 50 percent compared to buildings constructed in the 1980s and improve indoor air quality. Despite this impressive goal, the standards still fall short of international standards. For example, Chinese ventilation standards are less than half as stringent as requirements set out by the American Society of Heating, Refrigerating, and Air-Conditioning Engineers (see Different Standards, Different Costs). Despite uneven implementation and enforcement, China's building codes and standards have begun to influence procurement decisions for large items, such as windows, HVAC systems, lighting, and home appliances. In Shanghai, market response should be even more noticeable beginning in 2005, when the city plans to enforce the codes on all new and existing buildings. Though regulations establish minimum thresholds and remove the worst performers from the market, they generally do not stimulate innovation. MOC, the PRC Ministry of Science and Technology (MOST), and SEPA are thus evaluating and increasingly encouraging the adoption of the more advanced green building practices found in green building certification systems such as the Leadership in Energy and Environmental Design (LEED) system of the US Green Building Council (USGBC). LEED evaluates and certifies building environmental performance in site selection, water and energy efficiency, material specification, and indoor environmental quality. MOST, with technical support from Qinghua University, has introduced another green building rating system: The Green Building Assessment System for the 2008 Olympics. The system is modeled primarily on LEED and Japan's Comprehensive Assessment System for Building Environmental Efficiency. The major difference between LEED and the Olympic standard is that LEED focuses on post-construction performance, while the Olympic standard requires interim completion of four complex, separate standards for the planning, design, construction, and operations stages. This may explain why all the Chinese commercial developers seeking green building certifcation are pursuing the US LEED certification. LEED, an industry-accepted standard similar to ISO 9000 and 14000, also confers international recognition. Despite the fact that LEED metrics and documentation may need to be adjusted to better reflect Chinese regulatory and industry conditions, Chinese developers have registered projects for LEED and, with foreign assistance, are working their way through the LEED certification process. Rising demandRealizing that "green" sells, real estate developers have begun to market their projects with names that convey a more healthy environment. Anyone driving through Shanghai cannot help but notice the scores of massive billboards advertising high-end properties with names such as New Forest Eco-Town and Oasis Island Garden Villas, indicating that environmental living has become synonymous with high-end living. Rarely, however, do such developments incorporate significant environmental improvements. By building according to LEED standards and seeking LEED certification, a small number of progressive real estate developers are beginning to redefine the Chinese concept of "green" and feed the growing demand among middle-class Chinese and expats for truly healthy and comfortable living and working environments. To ensure their success, such real estate developers are conducting green building seminars, highlighting green interventions throughout their marketing brochures, and conducting other outreach. According to EMSI's experience, "product differentiation"—rather than environmental concern or even long-term operating cost savings—is the main reason developers seek LEED certification. To date, none of the green projects under development has been completed, so it is too early to tell whether these developments will command an actual price premium. In EMSI's view, the primary goal of real estate developers is to attract the highest paying tenants and to fill the building quickly—which is important in a highly competitive real estate market. This increases building value and hence sales price. It also justifies the cost premium of the green building project, which is generally 2 to 5 percent of the original design cost. The new wave of green building projectsThe Natural Resources Defense Council and US Department of Energy have worked closely with MOST to develop a 13,000 m2 demonstration green building that will house the MOST Agenda 21 program—an international environmental program to address global climate change. The project, which was completed in February 2004, is still being evaluated for certification. The Shanghai Research Institute for Building Sciences has also built a demonstration project. It was designed to showcase and test 12 different products and technologies in areas including window glazings, radiant floor heating systems, wall insulations, natural lighting strategies, automatic shade controls, carbon dioxide emission systems, temperature and humidity controls, water reuse systems, and built-in solar panels. Green building demonstration projects designed by the UK-based INTEGER (Intelligent and Green) Ltd. have also been built at Qinghua University in Beijing and in the southern city of Kunming, Yunnan. Commercial projects are also springing up. Since EMSI entered the China market in 2002, the company has been contracted by developers of large commercial and residential projects in four major PRC cities: the Century Prosper Center in Beijing; the Harbin Songbei District Municipal Building and the Le Sang Estate Shopping Mall in Harbin, Heilongjiang; the Skyway Oasis Hotel and Apartments in Shanghai; and the Tiger Apartments in Shenzhen (see Green Building Case Studies). These projects total more than 450,000 m2. A growing and practical appreciation of greenChina's green building industry is still in its infancy. Nevertheless, the trend toward sustainable buildings is clear and irreversible. As China integrates into the world economy, momentum is building through the emergence of governmental programs, municipal green building councils, demonstration projects, and large commercial projects. China's staging of a "Green" Olympic Games of 2008 in Beijing and a "Green" World Expo 2010 in Shanghai strengthen China's deepening commitment to a more sustainable building sector. In the end, the favorable economics associated with green buildings will, more than any other single factor, sustain and drive this trend. Developers will increasingly understand and appreciate the fact that green buildings have returns on investment that are highly competitive with other projects. And as they do, they will depend more heavily on advanced technology and high-performance materials and systems. Business Opportunities in China's Green Building IndustryMany of the leading suppliers of high-performance building technologies and products—particularly in the area of energy—are already present in China. These include TRANE, Carrier Corp., and York International Corp. for heating, ventilation, and air conditioning equipment; Delta plc, General Electric Co., Honeywell, Johnson Controls Inc., and Siemens AG for building control systems; and Pilkington plc for window glazing. Nevertheless, there are other areas where few, if any, foreign building products are available. Many domestic firms manufacture environmental building products. But the quality is generally inferior unless such products are manufactured using foreign technology. The exception is low-tech products, such as aerated conclave bricks, solar thermal systems, and bamboo flooring. Listed below are the technologies that have the best prospects for incorporation into China's green building industry—and thus the most business opportunity. Energy-efficient technology
Water efficiency productsNorth China is one of the world's most water-deficient areas in per capita terms, and severe pollution means that conserving drinking water is fast becoming a key national environmental priority. Foreign companies have made inroads in the efficient plumbing fixture market, but many other areas are relatively open, including drip or micro-irrigation systems for landscaping, low-water cooling towers including nonchemical water treatment methods, and onsite water treatment and stormwater management systems, which are now required in many jurisdictions. Environmentally preferable materialsBeyond the major construction materials and equipment mentioned above, countless other products are typically incorporated into green buildings to reduce external environmental problems and improve indoor environmental quality, many of which are not yet available in China. These include interior products, such as paints with low volatile organic compound content, recycled carpeting, and environmentally sound office furniture. There will also be a growing demand for site preparation and erosion mitigation technologies. Examples of these are products and engineering services to reduce sedimentation, and soil stabilization and retention systems, such as pervious pavement products that allow rainwater to settle into the ground, preventing water runoff. —Kenneth Langer and Robert Watson  |
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