Energy efficiency and environmental preservation are still not among the first concerns of Lebanese real estate buyers when choosing their properties. Developers, though, are increasingly aware of the requirements they need to comply with to make their assets green. Only a few finished buildings are currently certified as green in Lebanon, but several more are in the pipeline.
Based on a report by international real estate agency Jones Lang LaSalle (JLL) in June 2013, Lebanon is not among the best performing countries in the Middle East by number of green property projects. According to JLL’s “Sustainability in the MENA region” survey, only 25 of the projects certified by US green building rating system LEED (Leadership in Energy and Environmental Design) were in Lebanon, compared with 802 in the United Arab Emirates, 173 in Qatar and 145 in Saudi Arabia. None of Lebanon’s LEED certified projects was platinum rated, the highest level in the system, while a total of eight schemes achieved a platinum rating in the region, with the UAE accounting for seven of them.
Room to grow
“Lebanon and Beirut are not where they are supposed to be,” says Fadi Moussalli, the Dubai-based regional director of JLL’s International Capital Group in the MENA region. “Abu Dhabi and Doha are way ahead in this sense. There are more initiatives there and the governments are taking some concrete steps. Unfortunately, Lebanon has other priorities now,” says Moussalli, referring to the country’s political vacuum, which ended only last month when a new government was formed after nearly eleven months of deadlock.
“In Lebanon we are followers rather than leaders,” he adds. “Other countries opened the way and in Lebanon there are still very few entrepreneurs who took a gamble in this regard.”
According to Moussalli, the fact that green building is not imposed as a standard within the country’s real estate market and the fact that buyers are not sufficiently aware of the benefits of going green makes it risky for developers to invest in the sector.
“Are buyers really likely to pay a premium for green in a market with stagnation? The developments which are likely to be green are luxury ones and the luxury market is stagnant,” he says.
Drivers on the highway that runs by the southeastern Beirut suburb of Yarzé may not even notice it is there, but the green hillside overlooking the city hides a large luxury residential complex. The 1,829 square meter (sqm) high-end asset La Brocéliande was built by real estate developer Greenstone, the property subsidiary of Saade Holdings group. The complex was designed to minimize its impact on the environment and maximize the efficiency of the energy and water consumption in its residential units.
The villa-like asset in the Lebanese mountains, developed between 2009 and 2012, was the first residential project in the country to meet the requirements of the UK-based certification system for green buildings BREEAM (Building Research Establisment Environmental Assessment). Along with its US counterpart LEED, this rating system is applied internationally and largely used by developers and owners to assess the sustainability of their properties. In Lebanon, these two international certifications are used along with local rating system ARZ, which was developed by the Lebanon Green Building Council as a way to adapt international standards to the country’s environment, society and real estate industry.
Although many projects under construction are already certified with LEED and several more have registered to obtain certification with one of the three systems, the completed and operating properties already green-rated in the entire country total only five, all located in the Beirut area. Besides La Brocéliande, which achieved a rating of “very good” under BREEAM, two finished buildings have obtained a LEED certification in Beirut. In Hamra, the International College Elementary School, which bought its premises from the American University of Beirut and renovated them to make them green, achieved a LEED gold certificate. In Hazmieh, the new 164,000 sqm Beirut City Centre shopping mall, inaugurated last year by Dubai-based Majid Al Futtaim development firm, was also rewarded with a LEED gold certificate in December. Two more completed buildings in Beirut are ARZ certified. They include an office occupied by consultancy firm Beta Engineering in the Badaro neighborhood, as well as the 3,900 sqm headquarters of the BLC bank group in the Adlieh district, which was the first to obtain an ARZ bronze certificate in 2012.
According to Greenstone’s development and operations manager Sami Andraos, going green may be easier for developers working within Beirut’s urban area, as they are operating in an environment that is already highly compromised and polluted. “Getting a certification is certainly more difficult for a project located in a green area than for one in the center of Beirut,” he says. “Based on the [BREEAM] rating system’s requirements you have to preserve the environment and we were operating in a natural area.” The visual and acoustic impact of the asset, Andraos says, had to be reduced to a minimum. “We even gave up around 28 percent of the buildable surface in order to include more gardens in the project.” The complex cost Greenstone around $3.5 million, but the firm’s development manager says it is impossible to determine how much less they would have spent on a non-green asset of the same size and nature. “We chose the location and started our project as a green one, so we knew right from the start that we would have to sustain high costs.” Insulating each apartment, as well as the entire building, both acoustically and thermally accounted for a great part of the burden the developer had to sustain in order to qualify for BREEAM. “No constructor in Lebanon implements the acoustic isolation,” Andraos says. “It is too costly. Luckily the area where La Brocéliande is located is very quiet, so we could use 28 mm double glazing.”
Whilst isolation up to this thickness can be found from local suppliers, Andraos says, anything above that is very difficult to find in Lebanon. “We have another project in Ashrafieh for which we have applied for BREEAM certification and because that area is in the middle of the city we had to use 32 mm double glazing. You can’t find that from Lebanese suppliers and we had to get it from Germany.”
The costs of being green
Whilst BREEAM adapts its requirements to the countries where projects are, some of the green features it suggests are not easy to implement in Lebanon. “They wanted us to get a composting machine for waste, but there is only one company in Lebanon that uses that system and it would have cost around $2,000 per month. Residents would have never paid that, so we decided to drop the idea.”
Whilst the costs faced by developers in order to build green may reflect on selling prices when assets are put on the market, this extra investment is, in some cases, part of the initial budget and is not transferred to buyers, according to Andraos.
“We planned to build green and part of the costs was absorbed before we sold,” he says. “Based on Lebanese laws we didn’t have to go green, but we did it anyway, although clients are not sensitive to this issue. We need to start somewhere though.”
Lebanese engineer Ali Berro, who runs his engineering consultancy business in the Beirut district of Badaro, is among the Lebanese real estate owners who developed a sensitivity to environmental issues before they started to be considered by developers and buyers in the country’s property market.
Berro’s office premises are located on the second floor of the Al Nakhil building, which is almost 50 years old. Built in 1966 by Lebanese developer Mohammad Khouri, it was renovated twice in the past 30 years. Despite the changes brought about by the two refurbishments, the last of which was completed in 2000, the mainly residential complex is still not green. The fact that the building was lacking the minimum energy and environmental sustainability requirements to seek green certification did not stop Berro — the owner of one of the building’s three office units — from making changes within his property to reduce its energy and water consumption, as well as its impact on the environment. As a result, the venues of Beta Engineering are now one of the two real estate assets to have obtained a green certificate based on the Lebanese ARZ system.
Berro’s office, as well as the other ARZ-certified operating building in Beirut, achieved a bronze rating. Whilst this level of certification is the second lowest after the mere “certified” level in the 4-degree Lebanese system, qualifying for it requires a major and continuous commitment on the part of owners and occupiers. Energy and water consumption in Berro’s office is diligently tracked, waste management is regulated, and the company’s ten employees have all embraced an environmentally friendly lifestyle, at least during their workday.
The engineer says, although he had no control over the rest of the building and he could do nothing to make it “greener”, he felt that he had to change at least his own property to make it more sustainable, especially due to the nature of his engineering consultancy.
“I have been working in the green business for ten years,” he says. “I couldn’t be a carpenter and have my own door broken.”
Berro spent $7,660 to comply with the standards required by the ARZ grading system. Most of them had to do with monitoring consumption, minimizing and recycling waste, and reducing pollution from transport by asking employees to share cars or to use buses. This last criterion is particularly crucial in Lebanon, where public transport is almost non-existent and the road system is unable to bear the traffic burden efficiently. This is partly why choosing the right location when buying or building a property is a fundamental step in determining its environmental sustainability.
“I am the only one here who has to travel as far as 15 kilometers to get to work,” says Berro, who is based in the Mount Lebanon village of Bchamoun. “Some of my employees walk to the office, three of them come together in the same car and some use buses.”
The office location also helps Berro reduce its electricity consumption for illumination and air conditioning. “My office gets a lot of sunlight during the day and we shut down at 4 pm so we don’t really need to keep the lights on all the time,” he explains. “We also get enough ventilation, so in summer we can use fans rather than air conditioning in most of the office.”
Installing a water meter was one of the first changes Berro had to make in order to obtain a green certification. “In Beirut we don’t have meters, so I had to install one in May 2012,” he says. “Now we can make readings and track our water consumption. We use 48 cubic meters of water per year, mostly for cleaning and hygienic purposes.”
Installing small solar panels in the kitchen balcony area, replacing the original fridge with a smaller one and the company’s paper registers with CDs, using low-consumption electric equipment and limiting water waste from the toilet flush by connecting it with the sink are some of the other green improvements Berro implemented in his office.
Reaping the benefits
Berro said that it took him only two weeks to make all the improvements needed to turn his office into a green asset. “No matter how small it is,” he says, “you can always make it green.”
When asked why he didn’t go for a higher rating within the ARZ system, Berro says it was due to the fact that he had to buy the asset as part of an existing building and some key changes required by the silver and gold certificate would have involved major improvements.
“A gold certificate would have cost me around $10,000 more,” he says. “For the silver I would have had to replace the existing windows with double-glazed ones and that alone would have cost me around $7,000.”
Money he saved in bills has countered renovation costs incurred to achieve a bronze certificate. “My electricity bill has dropped by 24 percent,” he says. “Compared to what I am saving, $7,000 is really nothing. We should have done this long beforehand.”
According to Gilbert Tegho, founder of green consultancy e-EcoSolutions and a board member of Lebanese Green Building Council, the cost of going green is difficult to quantify, but buyers of green assets may face a maximum increase of between 5 and 10 percent, or lower, in the price of their property, while saving up to 40 percent in bills.
“It is still not easy to quantify the cost of green certification in Lebanon, but malls and schools who decided to go for it in Beirut are paying it back in three years max,” he says. “On the residential side, there is not much Green Building certification achieved in the market. While many projects have registered, only a few pursue the certification.”
Complying with green certification requirements, Tegho says, may prove more complex than it seems, especially in a country like Lebanon.
Water consumption is usually not tracked, but the country may soon face a shortage, which will make the cost of water clearer to everyone. “We have a problem with water in both quantity and quality terms,” Tegho says. “We will face a big shortage in the summer of 2014 and everybody will start to value the cost of water. Maybe they will start to change their taps (with low-consumption ones), just like they changed to energy saving lights due to high electricity costs.”
When it comes to the view offered by a building to its occupiers, orientation is a crucial point. “In Beirut most buildings are oriented towards the sea (west), because people like a sea view, but this is wrong for energy-saving, as these buildings accumulate more heat in summer than those which are south-facing with less natural daylight time.”
Green without government
The materials used inside real estate projects are also tricky. “A lot of them are toxic,” Tegho says. “Standard paint, for instance, is very bad. When you smell fresh paint, you are basically breathing cancer. Low volatile organic compound paint is healthier but there is no mass awareness over this issue.”
Tegho admits that attention toward sustainable building has grown in recent years. “In general, green building is still seen as a marketing tool rather than a necessity,” he says. “But five years ago we still had to explain the parameters. Now many building professionals know them.”
These improvements came about with almost no support from the government, besides an incentive plan launched by Lebanon’s central bank, which subsidizes partial loans at 0% interest to the developers of energy efficient real estate projects.
“Unlike what happens in other countries, in Lebanon no law is pushing for green building to grow, and the market is relying totally on financial incentives and whether the real estate market is up or down, which means that the green part is always the one to be put down when times are bad,” says Tegho.