When people think about climate change, most are quick to blame the burning of fossil fuels, vehicle emissions, and deforestation.
However, what many may not realise is that the buildings in which we live and work are also responsible for climate change; almost 40 per cent of global carbon emissions stem from the round-the-clock cooling, heating, lighting and powering of appliances in buildings, with the remaining 11 per cent from materials and construction. The issue is compounded in cities, which consume almost 80 per cent of the world’s energy.
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One city that is adversely affected by high levels of energy consumption is the Philippine capital of Manila, the second-largest city in the country. With a population of over 14 million people and a population density of over 42,000 people per square kilometre, it is the most densely populated city in the world. There is a correlation between the high population density and increasing levels of heat stress in the city, which is when people are unable to cool themselves enough to maintain a healthy temperature and typically caused by prolonged exposure to high temperatures and humidity, and physical exertion.
Manila’s year-round tropical climate adds to the heat stress and sees the city struggling to meet the power supply. City-wide blackouts are mainly attributed to the high demand for indoor cooling and air conditioning during the warmer months of the city’s dry season. Key infrastructure, such as the city’s airport which saw two blackouts in 2023 alone, are not spared either.
The issue of water shortage has also plagued Manila in recent years, with the issue exacerbated by its rapid population growth, inadequate water supply infrastructure, and delays in new water source projects, and – not least of which – climate change.
The city saw 60 per cent less rainfall in the first six months of 2023 compared to the nation’s long-term average, with the decrease in precipitation attributed to the El Niño weather phenomenon. Since July 2023, more than half a million households have had to endure up to 11 hours of water supply interruptions as water levels of the Angat Dam – which currently supplies 98 per cent of potable water in Metro Manila – dipped below minimum operating levels.
These are some reasons why better solutions are needed to improve the city’s air quality, reduce emissions, and wean the city’s reliance on finite sources, emphasises Oliver Chan, chief sustainability officer of Philippine real estate developer Arthaland, who speaks to Eco-Business about the growing sustainable real estate market in the Philippines.
Tune in as we discuss:
- How sustainable buildings can reduce energy consumption and help Philippine households cope with periodic water shortages;
- Reasons why more businesses and customers are opting for sustainable real estate;
- The example the company strives to set for other real estate developers;
- Balancing sustainability and affordability in real estate;
- The legacy the company hopes to leave behind.
The Philippines faces its fair share of climate threats, from multiple typhoons each year, flooding, heatwaves, and extreme temperatures this year in particular. At the same time, the price of electricity in the Philippines – among the highest in Asia – may rise along with increasing energy consumption and contribute to carbon emissions over the next few decades. How does sustainable real estate play a part in reducing carbon emissions?
Sustainable real estate plays a huge role in reducing carbon emissions. First of all, the specifications of these buildings alone can reduce energy usage by about 20 per cent – at the minimum and when tenants consume less energy, they produce [fewer] carbon emissions – but what are these specifications you look for in a real estate development?
Firstly, in terms of water consumption, rainwater recycling is crucial. This system collects and recycles rainwater, which is then used for flushing toilets and irrigating plants. Implementing rainwater recycling alone can save about 20 to 30 per cent of water consumption.
Next is energy-saving measures. Installing low-E (low-emissivity) and double or even triple-glazed glass helps to minimise how much heat enters a building. Additionally, proper ventilation, including mechanical air intake and exhaust systems, is essential. The choice of mechanical equipment, such as energy-efficient air conditioning units, also contributes to energy savings. All of these measures combined result in reduced carbon emissions.
Arthaland Century Pacific Tower is the world’s first Edge Zero Carbon-certified building. Can you speak on the significance of this achievement and the lengths the company had to go to accomplish this?
What’s significant is that we are a relatively small and young real estate company; we have only been about for around 15 years. In the Philippines, we don’t even rank among the top five or 10 largest companies in the industry. However, by demonstrating that a smaller real estate company can successfully adopt sustainability initiatives, we hope to inspire others to realise that it is possible. We achieved this by putting our minds to it and focusing on what needed to be done.
A lot of people are also afraid of the costs that are associated with sustainability. But once you understand sustainability, you realise that cost doesn’t have to be an issue.
We were the first Edge Zero Carbon building to be recognised by the International Finance Corporation (IFC) in the Philippines in 2019. Since then, the number of Edge Zero-certified buildings in the country has grown to nearly 100 by 2023. This progress signifies that when people witness successful examples, they are inspired to follow suit.
Would you say sustainable real estate has increased in popularity in the Philippines over the last decade?
Yes, significantly. One factor is the influx of multinational companies entering the Philippines, such as Microsoft and Google. These companies are attracted to the country due to lower operational expenses, lower rent, and a relatively lower cost of living.
Sustainable building design, which can lead to lower energy consumption and cost savings for these companies, is also leading to increased demand from multinational companies and motivating developers to prioritise sustainable building practices to capture this market.
What is most challenging about making real estate sustainable in the Philippines?
For me, it’s acceptance. You need a lot of buy-in – not only from within your company – but also from external forces. One example is suppliers, as not all of them are observing sustainable practices as of today, and not all of them have sustainable products.
That is the most challenging aspect of sustainable building projects – getting others to accept that sustainability will benefit them in the long run. When people start thinking about how sustainability can provide long-term financial gains, only then can they realise that it is the best investment they can make today.
Are more buyers or tenants seeking to live or invest in sustainable property?
Yes, we are seeing more. The majority, composed of the younger generation, first-time homebuyers, and families just starting out, are seeking sustainable real estate. In the Philippines, more individuals aim to buy their first home and intend for the home to be their last; they don’t want to keep moving from one home to another.
I view this the same way as well. I have kids aged six, four, and four months old – and I want to give them a real estate investment that would last upwards of 30 or 40 years, or their lifetime, without them seeing the value decrease. I believe you can only do this with sustainable development.
Health considerations also play a significant role. In my case, my six-year-old has asthma. Every week, I take him out on a trip two-and-a-half hours away up north just to get some fresh air.
Sustainable developments, which can help to ensure good air quality, create an ideal place for families to live and raise their children. These factors are important in convincing the market that projects with sustainable features are the way to go.
How do you communicate the value of sustainability to potential buyers or tenants?
For us, it’s about finding ways to make our message relatable to our audience.
Take electricity, for example. Over the past 10 to 15 years, the Philippines has faced ongoing issues with blackouts and high electricity rates due to a lack of supply. By showing them how sustainable buildings can address these problems, people begin to realise how important this is.
Water shortage is another prevalent issue in the country – often making headlines. By highlighting how our building features can help address this concern, people see the value in sustainability.
Our actions today have a lasting impact on future generations – we may not feel the effects immediately, but future generations, especially the younger kids, will experience the consequences.
On that note, there is a need to balance sustainability with affordability, as sustainable features may increase the cost of a property. How does Arthaland strike a balance between both in ensuring that its property portfolio is both accessible to buyers and sustainable?
This is one thing we want to educate people about – if individuals understand what sustainability entails and what steps they need to take, it does not lead to increased costs. In our company, we have a saying: “sustainability is for everyone, not just for the affluent.”
For instance, we recently launched a mid-scale development featuring 28-square-metre studio units complete with sustainable features.
In addition, we have partnered with the national government to create a financing programme specifically for buyers of these affordable units.
In the Philippines, traditional bank mortgages typically come with annual interest rates of around 6.5 per cent to 8 per cent, which are only fixed for the first three years.
To partner with banks, projects must be certified sustainable by recognised bodies. This ensures buyers can secure a 15 to 30-year loan with a maximum interest rate of 4.5 per cent, which is 40 per cent lower than what banks offer, making sustainable developments more affordable.
We believe that understanding and education are key to advancing sustainability. As a real estate company, we play a small part in this larger movement. Through collaborations with local and national government entities, we are working towards our vision of making sustainability accessible to individuals across all socio-economic classes.
How do you see the future of sustainable real estate in the Philippines? What must sustainable real estate developers focus on in the decades ahead and what sort of legacy in sustainability real estate does Arthaland hope to leave behind?
Well, in the aftermath of the pandemic, it seemed that everyone was jumping on the sustainability bandwagon, seeing it as a mere trend.
However, sustainability is not just a passing fad. It is a belief system that should be practised not only at work but also at home. If we view it as a trend, it becomes nothing more than a marketing ploy.
For us, it is important to do what’s best for our buyers and investors. When we sell properties, we often emphasise capital appreciation and provide the best deal.
But how can we deliver on these promises if we aren’t sustainable? How can we expect multinational companies to lease from us if our properties are not sustainable – especially if sustainability has become an international mandate from their head offices?
Furthermore, how can we possibly guarantee a newlywed couple that their future children, who are not even born yet, will be able to utilise the same unit 18 years from now when they graduate? It is a daunting task. Therefore, in my opinion, belief and focus on sustainability are the key and only way forward.
For us, it’s about leaving a legacy for future generations. We want to make sure that the projects we leave behind will be there for future generations to use. That’s our first priority.
Additionally, we want to ensure sustainability is implemented across all market segments. Whether it’s for the rich, the middle market, or even for those less fortunate, sustainability must be accessible and beneficial for everyone.
As a Chief Sustainability Officer of a real estate company, what about sustainability or sustainable real estate do you feel most strongly or passionate about, and why?
For me, it’s all about leaving a better world for future generations. I want my kids to experience a world with clean and fresh air, where they can move freely and enjoy a long and healthy life. That’s the ultimate goal for me.
That’s why I am so passionate about pushing for sustainability. Our actions today have a lasting impact on future generations – we may not feel the effects immediately, but future generations, especially the younger kids, will experience the consequences. It feels as though people are unintentionally poisoning children from today without even realising it. We won’t be here in a few decades, but our children will. So why make it difficult for them – especially if we can make positive changes today?
Is there anything you’d like to add?
For me, sustainability is about education, understanding and believing in what you think is possible. As long as you believe in sustainability, have hope and make time to understand it, then anything is possible.
As a small real estate company in the Philippines, being able to get the first net zero carbon building in the world shows that everything is possible as long as you focus on something and believe in it.
The transcript has been edited for brevity and clarity.