Which cities in Asia-Pacific are the most sustainable?

Based on our APAC Active Capital Sustainably Led Cities research, Singapore, Sydney, Wellington, Perth, and Melbourne lead the pack as the top five sustainably led cities for real estate in APAC. These cities usually benefit from a myriad of factors, such as reduction in carbon emissions per person, large number of green spaces, and low urbanisation pressures. Unsurprisingly, these factors are also shared among the top 10 cities in APAC.

APAC Sustainably Led Cities Index Ranking

Top three factors that contribute to top ten ranking in APAC

1. Amount of green space available

To make our urban environments healthier and more liveable, and as cities grow to include more people in an already crowded space, nature and green spaces are now more vital than ever.

While there is currently no universal definition of green space, the World Health Organisation (WHO) defined it as “spaces [that] may include places with ‘natural surfaces’ or ‘natural settings’, but may also include specific types of urban greenery, such as street trees, and may also include ‘blue space’ which represents water elements ranging from ponds to coastal zones.”. A common urban green space that we might frequent would be public parks and gardens. Other widely used definitions even include public green areas used predominantly for recreation such as gardens, zoos, parks, and suburban natural areas and forests.

Regardless of definition, multiple studies have shown that green spaces bring about a spectrum of benefits for cities and their inhabitants, which ranges from mental to physical to social. Conversely, research has also shown that an inadequate amount of green space in the environment is associated with feelings of loneliness and lack of social support. Green spaces are even more essential now as people were too cooped at home during quarantine, thus it acts as a good combat tool against the pandemic.

Cities also benefit from this in terms of talent retainment, which in turn affects the pool of highly skilled workers in the city. It is now a fierce competition between cities to attract, grow, and maintain talents from around the globe. According to a survey done by Livability.com regarding factors to consider when making a relocation decision, 39% of all respondents listed outdoor attractions and a community’s arts and culture scene as top 3 factors in considering a relocation. The same survey also concluded that walkability and bike friendliness were among the top criteria for talents to relocate. Hence, providing adequate green spaces to boost living environment to the optimal is an advantage to cities when it comes to talent retention.

2. Green-rated commercial building

With 40% of carbon emissions emitted, 40% of the world’s energy being used and 30% of the world’s available drinking water being consumed from the built environment, it is only right that the industry devise ways to mitigate the worsening climate and carbon situation.

To incentivise developers to invest in sustainability, most government organisations in APAC have in place various green certifications to reward the building if it meets their requirements, such as reduced potential environmental impact, lessened energy, water, and material resource consumption, amongst others. There are also various reputable global certificates that developers can apply for their buildings. These awards serve as a differentiating factor to buildings in the real estate market, allowing corporates to cultivate a positive image for themselves, and enhance returns on both the leasing rate and resale value of their buildings. These awards are not mutually exclusive, and a green building could have multiple of such certificates, which would further boost their green status and stand out from the pack.

There are many local, country, and regional level certifications covering one or more elements of ESG. Some examples are listed in Table 1 below.

_{Table 1: Notable Green Certifications on the APAC and Global Level}

Other than the abovementioned awards, government authorities have also set aside a budget to aid building owners in retrofitting and raising the sustainability level of their buildings to contribute to the city/country’s green goals within a certain period. Owners are eligible for grants based on the extent of their retrofitting works. The higher the reduction in energy performance/emissions achieved through the refurbishment, the more the funding support received. Such plans would reach out to a wider range of stakeholders as some of the buildings are privately owned by individuals who might not have the financial means or motivation to keep their building up to date with the industry standards. The funding would then serve as a monetary incentive to encourage these owners to not only contribute to the environment but also enhance the competitiveness of their buildings.

With increased awareness about the exacerbating climate issues in APAC, more tenants are opting for buildings with sustainable features as it not only contributes to the environment but also their corporate image. However, as demand currently outstrips supply, landlords could command a premium of as high as 10% on sustainable buildings. Based on our observation, developers in APAC will likely expedite their momentum in their development of sustainable buildings to capture the rising demand for green spaces and alleviate the effect of climate change.

Moreover, our study combining proprietary Knight Frank data with green ratings and other geographical evidence for prime office buildings in London, Sydney and Melbourne has found that green-credited buildings command 8-18% sales price premium compared to non-green credited buildings (refer to full study here), further motivating building owners to develop buildings that have sustainability features.

3. Urbanisation pressure

A study done by the United Nations has projected that by 2050, two thirds of the world’s population would reside in cities or other urban areas. One of the biggest contributors would be Asia where urbanisation rate has never been faster in recent years. In the same outlook, half of the world’s urban population would be concentrated in Asia, with China and India having a combined share of 25%.

Cities generate more than 80% of the global Gross Domestic Product (GDP), rendering the phenomenon of urbanisation ever more pertinent. If managed well, urbanisation can lead to sustainable urban growth by enhancing productivity, encouraging innovation and current ideas to form.

However, the rate and scale of urbanisation bring about a range of social and environmental challenges and resource demands. Unforeseen challenges resulting from rapid growth include lack of affordable housing, well-connected and economical public transportations, and other essentials and amenities one would require. Among the most pressing issues would be the availability of jobs, especially for the urban dwellers living in poverty in the cities. The World Bank estimated for the number of people living in poverty to grow throughout emerging Asian economies outside of China in 2021, following the same prediction from 2020. This can be attributed to employment opportunities being squeezed from the prolong pandemic.

Hence, how well a city is planned and managed is vital since its land use pattern and physical infrastructure will stay status quo for generations to come. Its functionality will determine its ability to accommodate an urban sprawl, albeit at times an unsustainable one.