en.Wedoany.com Reported - JLL, a leading global professional services and investment management firm specializing in real estate, recently released an assessment indicating that over half of Vietnam's office buildings urgently require upgrades to maintain and enhance asset value, as older buildings face dual pressure from tenants regarding environmental and workplace standards.
This assessment primarily examined office building inventories in Ho Chi Minh City and Hanoi, with a total supply of approximately 4.1 million square meters. Grade A office buildings account for about one-third of the total, but approximately 65% of Grade A space has already obtained international green certifications. This intensifies competition between newly built environmentally-targeted office buildings and older structures built 10 to 20 years ago. While many older buildings still occupy prime locations and maintain stable tenant bases, they often lag behind new projects in terms of mechanical, electrical, and plumbing systems, energy efficiency, indoor air quality, and health-related ancillary facilities.
JLL's global research indicates that if owners delay investment in upgrades, risks will increase significantly: without renovations, approximately 65% of existing office buildings worldwide could face market obsolescence by 2030. The firm states that for years, the office market has been primarily driven by location and rental rates, but tenants are now increasingly focusing on energy efficiency, workplace quality, alignment with Net Zero targets, and employee experience. This shift is prompting landlords to reposition existing inventory, especially in central areas where alternative supply is limited and older buildings still offer convenient transportation and stable tenant communities.
Consultants believe the market is not advocating for wholesale replacement of older buildings but rather a shift toward renovation and repositioning. Owners are attempting to improve environmental performance and daily tenant experience while retaining the locational advantages of older properties. JLL estimates that investment in such renovation projects typically accounts for 1% to 7% of total asset value. Efforts are concentrated in areas where energy use and tenant standards have the most significant impact, including efficient HVAC systems, LED lighting, smart building management tools, air quality improvement measures, water-saving systems, and health-focused amenities.
According to the firm's analysis, these expenditures can protect revenue streams and reduce operating costs over time. Buildings with green certifications and clear emission reduction plans can command rents 15% to 30% higher than comparable assets. In Ho Chi Minh City, several upgraded buildings have become benchmarks, such as Me Linh Point Tower, mPlaza, and Vincom Centre Tower. These projects have received positive market responses after renovations, reflecting tenants' heightened focus on building quality and environmental standards.
Demand primarily comes from multinational tenants and companies with formal carbon targets. Firms in technology, finance, pharmaceuticals, and professional services prioritize office buildings with green certifications, energy consumption tracking capabilities, and support for Net Zero targets. This demand is closely tied to corporate decarbonization commitments, especially when companies face pressure to address Scope 3 emissions within their supply chains and leased properties. For tenants, property selection is becoming part of reporting and compliance, rather than merely a real estate decision based on rent and location.
Stephanie Dinh, Director of Project and Development Services at JLL Vietnam, stated that these pressures are changing owners' attitudes toward renovations. Dinh noted that Environmental, Social, and Governance (ESG) criteria are creating new standards for the office market. In the past, many owners viewed building upgrades as a cost item to consider, but the market now observes a completely different landscape. Buildings that actively invest in energy efficiency, occupant health, and operational technology are better positioned to attract tenants, maintain rental levels, and protect asset value over the long term. For many existing buildings in Ho Chi Minh City, this represents an opportunity to reposition assets and create new competitive advantages.
This shift is also altering the balance between landlords and tenants. Both parties seek lower operating costs and stronger environmental performance from office spaces. Landlords are trying to defend occupancy rates and rents, while tenants expect buildings to support internal climate goals and provide healthier workplaces. Dinh stated that this dynamic is creating a more aligned relationship between both sides of the market. Previously, landlords pursued profit maximization while tenants optimized costs; now, ESG creates opportunities for both parties to achieve their respective goals: landlords benefit from higher occupancy rates, better rental levels, and preserved asset values, while tenants benefit from lower operating costs, higher quality environments, and the fulfillment of carbon neutrality commitments. Data indicates that the challenge is significant, with most of Vietnam's office building inventory lacking the latest green certifications. For owners of older properties in central business districts, the choice is increasingly clear: either invest in upgrades or risk declining competitiveness as tenants tighten building standards.
