The Road to Sustainable Real Estate vol.3: Green-certified Office Buildings in Japan

• Real estate accounts for one-third of total CO2 emissions and accelerating emissions reductions is crucial. Japan aims to reduce greenhouse gas (GHG) emissions by 46% by 2030 compared to FY 2013 levels, but real estate-related emissions reductions have not yet reached half of this target. Urgent action is needed to reduce emissions from real estate.

• The number of green-certified large office buildings in Tokyo, Osaka, and Fukuoka^[1] is increasing but only a limited number meet global standards. Very few buildings have attained internationally recognized certifications such as LEED or the highest rank (S) of most prominent domestic certification, CASBEE-BD^[2].

• Effective use of BELS^[3] and Net Zero Energy Buildings (ZEB) are needed. In all three cities, less than 10% of buildings have received a BELS rating. Furthermore, less than 5% have achieved ZEB or BELS 5-star status, which is awarded for energy efficiency rates of 40% or more

• It is critical that Japanese offices become sustainable by utilizing both building certification and energy performance evaluations^[4]. While energy performance evaluations are effective tools for decarbonization, properties need both energy performance ratings and green building certifications to be objectively evaluated as sustainable. This combination addresses various environmental aspects, including climate resilience, water, and biodiversity.

^{[1] In this report, large office buildings in Tokyo, Osaka, and Fukuoka refer to leasable office buildings located in the CBDs of these cities, completed in or after 1990, with a total floor area of 30,000 square meters or more for Tokyo, or 15,000 square meters or more for Osaka and Fukuoka.}

^{[2] CASBEE Certification for Buildings (CASBEE-BD) evaluates and rates environmental performance at the building scale.}

^{[3] BELS (Building-Housing Energy-efficiency Labeling System) is a Japanese certification system that evaluates energy performance in a building.}

^{[4] Buildings without green building certifications or energy performance evaluations are not necessarily non-green or energy-inefficient. However, it is difficult for third parties, including tenants and investors, to assess the performance of individual buildings without such labels. Therefore, this report bases its analysis on the presence and value of these certifications.}

Japan aims to reduce greenhouse gas (GHG) emissions by 46% by 2030 compared to 2013 levels. In the real estate sector, we need to reduce energy-derived CO2 emissions by 51% in commercial and other sectors and by 66% in the residential sector to meet the goal. However, as of FY2022, emissions in the commercial sector had only decreased by 24%, while the residential sector saw a 25% reduction. There is an urgent need to accelerate CO2 emissions reduction in real estate, which accounts for about one-third of total CO2 emissions.

As of the end of 2024, 65% of large office buildings in Tokyo have green building certification. However, only 3% have a LEED Gold certification, which is considered relatively difficult to acquire, or the highest rank (S) of CASBEE-BD, which has a more moderate difficulty level. In Osaka and Fukuoka, 42% and 27% of large office buildings respectively are green certified. However, only 3% of buildings in Fukuoka have achieved the top rank (S) in CASBEE-BD, and there are no LEED-certified buildings in either city. Incentives may be required to encourage developers to work towards these global standards.

Acquisition status of green building certification based on the number of buildings

As of end-2024, only 7% of large office buildings in Tokyo, 9% in Osaka, and 9% in Fukuoka had acquired BELS certification. The number of buildings that have obtained ZEB status is even more limited at 3% in Tokyo, 5% in Osaka, and 3% in Fukuoka. Some properties have insufficient CO2 emission reductions, even if they have acquired the highest rating under the local green building certification, which has relatively lenient evaluation standards. Thus, energy performance evaluations such as BELS and ZEB are needed to promote reductions in energy consumption and CO2 emissions.

Acquisition status of energy performance evaluation based on the number of buildings

While BELS and ZEB are effective tools to address the urgent issue of climate change, they are specific to energy performance evaluation. Environmental regulations regarding water, biodiversity and other areas are expected to become stricter in the future, and real estate will be evaluated as sustainable (or otherwise) from various environmental aspects. It is desirable, therefore, to have both globally recognized green building certifications (which evaluate comprehensive environmental performance) and energy performance certifications.