by Savills Vietnam 27/12/2023, 11:28

What real estate changes are needed for sustainable development?

Sustainable development and green construction are starting to dominate real estate development; however, green properties in Viet Nam remain limited. Savills experts affirm that Viet Nam has much to learn, and they should prioritise the country’s sustainable development journey.

What Does Sustainable Development Look Like in Viet Nam?

Mr. Mauro Gasparotti, Director of Savills Hotels, states that Viet Nam’s slow transition and adaptation to sustainability are partly due to its real estate development cycle. Projects require time for planning and construction before operations, and in Viet Nam, many existing projects were planned and developed before the Covid-19 pandemic. During this time, investors and developers prioritised scale rather than sustainability or quality.

"In the next real estate cycle, we expect sustainability factors to become more apparent as many investors are increasingly focusing on integrating green and environmentally friendly elements from the planning to project implementation phase," said Mauro Gasparotti.

According to the expert, sustainability takes different forms depending on the type of real estate. For example, for hotels, sustainability is becoming an indispensable factor as travellers become more aware of the environmental impact of tourism. This drives demand for sustainable products with a minimal environmental footprint.

"We also need to consider the sustainable development of localities, specifically in coastal destinations like Phu Quoc and Cam Ranh. Localities can simultaneously develop tourism activities, preserve community values, and maintain environmental quality and landscapes," he added.

Sustainability will become a crucial criterion that the market seeks. Quality of living, environment, and sleep are factors that buyers are increasingly concerned with. Developers can consider improving these factors by incorporating natural landscape elements or healthcare facilities.

Mauro Gasparotti, Director of Savills Hotels

For commercial real estate, including offices and retail properties for rent, tenants, especially foreign businesses, are demanding buildings that meet green and sustainable criteria. Given that green commercial stock is limit ed and in high demand, tenants are often willing to pay more for properties with green certifications.

For residential real estate, developers are paying more attention to sustainable development and enhancing wellness experiences. Proper land use planning is essential to assessing the right use of land and paying careful attention to what aspects of development uphold profitability but also sustainability.

Customer Psychology Shifts Toward "Green" Products

"Green projects with sustainable elements are not just marketing tools or product communication. Now, green construction with sustainable elements are giving projects a competitive edge.

Buyers know what they are looking for and want choices. To maintain and improve competitiveness, investors should focus on green elements and what makes development sustainable when deploying projects," the Director of Savills Hotels said.

Zannier Hotels in Phu Yen

Market shifts mean that sustainability is gradually becoming an indispensable factor in project planning and development. Investors and developers should embrace new approaches and products.

"Previously, buyers had to be convinced of ‘invisible’ values like sustainability. However, now, buyers are more discerning and are willing to pay more for well-planned and sustainable products. This means that products that uphold green and sustainable values can communicate this as a positive point of difference, which can help them profit margins if they deliver the right products. Green projects can also deliver reduced operating costs, which appeals to end-users and landlords.”

Changes Needed

Two significant benefits of green construction include potentially higher selling prices and optimised operational costs. Investors should consider that green construction extends beyond marketing but also speaks to the financial efficiency of long-term operations.

"Sustainable development takes the effort of an entire community. We can observe this in our daily activities, such as waste disposal. In European countries, each household will sort waste at home before it is collected. Community education will be significant in implementing long-term and significant change in Viet Nam," Mauro Gasparotti pointed out.

Community education and involvement can be encouraged through greater communication. There can be marketing that uses case studies of sustainable development and environmental conservation. An example is Con Dao, which can be used as an example for other destinations.

Hotel operators, especially those in the luxury segment, are putting in more effort in the journey towards sustainable development. Notable operators doing this include Six Senses, Mandarin Oriental, and Zannier Hotels. These hotel chains incorporate sustainable elements and preserve the cultural identity of an area, setting a model for other projects to refer to in the journey toward green and sustainable development.