Singapore is leading the region in the transformation to a sustainable society built on the principles of protecting the environment and preventing climate change. At a corporate level, C-suite executives are pursuing company goals with environment, social, and governance (ESG) principles in mind. 

Landlords who take into consideration the environmental aspect of corporate development goals are able to appeal to a wider tenant customer base. Singapore saw this shift to more sustainable building practices nearly two decades ago and have been able to prepare the country for this evolution in the commercial real estate market.

First, let’s find out what is Singapore’s Green Mark Certification, how it works toward the greening of buildings, and its implications for Singapore’s commercial real estate sector. 

What is Singapore’s Green Mark Certification?

The Singapore government, through the Building and Construction Authority (BCA), launched the Green Mark Certification in 2005. It’s a green building rating system that evaluates buildings based on their environmental performance using several criteria, including energy and water efficiency, building materials used, and indoor environmental quality. Based on the outcome of these evaluations, buildings are awarded with a certification level ranging from Green Mark Certified to Green Mark Platinum.

The goal of the Green Mark Certification programme is to help achieve Singapore’s Green Building Masterplan. It’s a plan that aims to have 80% of total gross floor area (GFA) of buildings to be green by 2030. By then, 80% of all new buildings must be Super Low Energy buildings, and there must be an 80% improvement in energy efficiency compared to 2005 levels. In other words, 80% of all buildings in Singapore must meet the BCA’s green building standards by 2030.

The year 2030 coincides with the United Nations’ 2030 Sustainable Development Agenda and the Paris Agreement, which was adopted in 2015 as a framework for a concerted global climate action. It’s also Singapore’s long-term goal to achieve net zero emissions by 2050, transforming the country into a global leader in sustainability.

How the Programme Has Worked to Help Green Singapore’s Commerical Real Estate Market?

As of 2023, Singapore has already achieved a 55% green building rate, with more than 4,600 buildings having achieved the Green Mark Certification. That involves over 146 million square metres of GFA. ¹

The number of buildings awarded with the Green Mark soared nearly three-fold in 2022 post-pandemic, as hundreds of applications were delayed. The average for the three years from 2020 to 2022 was 495 approvals, indicating a continuous rise in the demand for Green Mark certification.

These buildings typically are equipped with a building analytics platform that, when working alongside a building energy management system, provides real-time insights into the building’s energy performance. Not only can this help improve a building’s efficiency when it comes to things like lighting, air-conditioning, and water consumption, but it can also ensure a smooth renewal of the building’s Green Mark Certification.

Implications of Singapore’s Green Mark Certification Programme on Commercial Real Estate

A study on the impact of the Green Mark on Singapore’s property market involving 300,000 units sold between 2005 and 2017 concluded a premium exists for buildings bearing such certificates. Indeed, Grade A office stock enjoys a rental premium as high as 18% for buildings certified with a green mark. 

Since rental expenses can amount to anywhere from 2% to 20% of a company’s operating expenses, ensuring that amount is spent on green buildings enhances a company’s appeal, risk profile, and employee satisfaction.

Singapore’s Green Mark Certification has done a great deal to promote the city-state as a go-to destination for innovative, tech-driven enterprises all around the world. Companies are willing to pay higher rents to lease sustainability-certified buildings. 

Nine out of 10 Grade A offices in Singapore were certified green as of September 2022. This greatly benefitted Singapore’s commercial real estate market in 2023 when major financial centers around the world (i.e. Hong Kong and New York) were facing rising vacancies.

In the first half of 2023, Singapore's prime office rents increased 0.5%, defying a global slowdown. The vacancy rate in the central business district at the time reached 7.5%. Owing to a more cautious economic outlook, the office rental market has further eased off. Grade A office rents finished 2023 with a modest 1.1% growth, while expectations are for a 2% to 3% decline in 2024.

Singapore’s real estate investment trusts (REITs) have dedicated enormous resources to building a portfolio of assets that adhere to the green building programme set forth by the government. One of the biggest such REITs, the Keppel REIT, has all its Singapore office assets bearing the highest BCA Green Mark Platinum Award. This has allowed Keppel REIT to enjoy a 99% occupancy rate for its Singapore properties.

This gives owners of existing buildings without Green Mark Certifications, as well as new building developers, strong incentive to spend the capital required to upgrade their structures to support BCA’s green qualifications. 

According to the BCA Building Energy Submission System, existing buildings that retrofit to meet Super Low Energy (SLE) building standards are 63% more energy-efficient than those that did not upgrade. New buildings that adopted SLE from the start are capable of achieving a payback on their investment in as little as 4.5 years.

The Green Mark Certification launched in 2005 proved to be a transformational programme that set Singapore apart from the rest of the world in sustainable building and construction. It encourages building owners and developers to pursue green alternatives to construction, planning and operation, with the environment in mind. 

The benefits of pursuing environmentally friendly buildings have resulted in tangible gains for landlords and operators in the form of rental premiums on both Grade A and B offices, while resulting in a reasonable payback period for capital deployed in the quest for achieving a Green Mark Certification. 

If you need strategic advice on how to retrofit your buildings to comply with the green standards and yet remain profitable, find out how our ESG experts can help you do so here.

¹ https://www.cim.io/blog/the-green-mark-certification-scheme-explained

² https://www.sleb.sg/Building/GreenMarkBuildingsDirectory