Japan is going greener

June 1, 2016 / By  

Japan was already classified as “Transparent” in the last JLL Global Real Estate Environmental Sustainability Transparency Index published in 2014. However, it’s made major strides since then. The recent 17 Sustainable Development Goals adopted as a result of the United Nations’ Sustainable Development Summit in September 2015 will only further bolster the progress which has been made over the past two years.

The establishment of the Act on the Improvement of Energy Consumption Performance of Buildings launched this year aims to further improve carbon emissions. As a result, new non-residential buildings with an area of 2,000 sqm or above will now be obligated to conform to minimum energy consumption standards. Meanwhile, the Building Energy Efficiency Labelling System (BELS), introduced in 2014, now provides a market specific energy benchmarking system for real estate. These moves are helping to shape real estate developers’ and investors’ sustainability agendas.

It’s not just legislation supporting a change. Green building rating systems are already in place within the market, with the internationally recognised LEED standard increasingly being adopted, so far in 75 buildings. However, a local equivalent, CASBEE, developed by the government specifically for Japan has also been put in place and already covers 304 assets.

The banking sector is also helping to encourage the development of a more sustainable real estate industry e.g. The Development Bank of Japan (DBJ) and Sumitomo Mitsui Banking Corporation are now offering favourable interest rates for financing of buildings which meet their own sustainability standards.

We are already seeing tangible results in the leasing market in the form of increased demand from corporates to occupy sustainable real estate, and the provision of such space by landlords. According to GRESB (Global Real Estate Sustainability Benchmark, a leading industry body), leasing agreements that incorporate green lease terms have increased in Japan from a limited number of instances in 2014 to 36% of all leases in 2015 (based on respondents surveyed). In a bid to further promote adoption, the Ministry of Land, Infrastructure, Transportation and Tourism has released the Green Lease Guide this year.

In the investment market, we are seeing investors adopting Responsible Property Investment strategies. These focus on investing in the development of sustainable assets and also incorporate energy saving initiatives into the life cycle of existing real estate. This is boosted by savings to the bottom line through the preferential interest rates offered by select banks should these assets meet their specific green criteria for financing. As at April 2016, DBJ had certified 324 buildings, with a floor area of 17 million sqm.

The new Basic Energy Plan, launched by the Government of Japan in 2014, outlines phased-in obligations for newly constructed houses and buildings to meet energy efficiency standards by 2020. These major steps will continue to ensure that Japan moves ever closer to a more sustainable built environment.

Look out for Japan’s new ranking in the JLL Global Real Estate Environmental Sustainability Transparency Index – out soon!

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