Why is going green the way forward in commercial property and across the entire property sector?
Put simply, it makes commercial sense. The cost to design in line with best practice Green Star principles is no longer an inhibiting factor like it was 10 years ago, with a marginal difference (if any) between a ‘green’ vs non-green design. Recent MSCI research also shows outperformance of NAEBRS 4-6-star office rated buildings compared to low NABERS Energy ratings, demonstrating increased annualised returns.
In addition, a sustainable building is no longer a nice to have, but an expectation by tenant customers. There’s a greater understanding of the link between a more sustainable building and a greater amenity or experience in the workplace – better air quality, less hot/cold complaints, great end of trip facilities, and better F&B offerings with healthy food choices. There’s also an increase in demand for sustainability by Millennials in the workplace who are more engaged in philanthropic causes and wish to work for an environmentally responsible organisation. With Millennials projected to make up 75% of the workplace by 2025, it’s important for organisations to respond to this growing demand for a sustainable workplace.
How can commercial landlords ensure that their properties are as green as possible?
It starts with good design and development principles. The Green Star rating tool is Australia’s largest, holistic rating system that has been used to rate over 2,200 commercial office spaces on a scale of 1 star to 6 stars. In the same way you wouldn’t hand Ferrari keys to a to a two year old and hope for the best, a brand new development designed in line with best practice sustainability design principles needs to be managed effectively and efficiently to achieve the best sustainability outcomes.
At CBRE, we advise clients on several operational efficiency measures to ensure the best outcome for their buildings. In 2019 we rated over 3 million sqm of commercial office space with the NAEBRS Energy rating tool. This provides a fantastic benchmark to identify energy saving opportunities such as correction of energy wastage events, fine tuning of BMS set points and upgrade of assets in the building where necessary.
It’s not just about energy though, and with increased landfill levies across the country it is important to manage waste diversion effectively. This starts with solid expectations upon procurement of contractor services for waste and cleaning services, tenant engagement to communicate effectively and instil behaviour change, and finally, close monitoring and management of the data for greater visibility and reporting.
Where I’ve seen the best sustainability outcomes for an individual building or at a portfolio level is where there are very clear commitments and targets, such as net zero by 2030, 6 star NABERS Energy or zero waste to landfill commitments. Clear sustainability targets keep the entire property team in check and working towards a common goal.
Are there any minor changes that commercial landlords/tenants can make to make their property more sustainable?
Right now, with organisations’ hours of occupancy in a building shifting in line with a more flexible workplace policy, buildings are no longer occupied at 100% 9am-5pm. The demand for heating and cooling is being extended outside of these traditional working hours as staff decide to come to the office earlier and leave earlier for example. The varying occupancy density can make it challenging to manage the building efficiently. It’s important for landlords and managing agents to have those conversations with their tenants to understand how COVID has impact their occupancy density within their tenancy, how this deviates from agreed lease terms, and therefore better manage heating and cooling demands on that floor to ensure minimal energy wastage where possible.
How does Australia compare with other countries in terms of sustainable building?
Australia has demonstrated leadership for nine years in a row in the Global Real Estate Sustainability Benchmark (GRESB), an investor driven benchmark representing over $6 trillion worth of commercial assets. The Australian real estate industry has the best operational rating tool in the world in NABERS, and there is an increase in average NABERS results year-on-year (current average is 4.5 stars for NABERS Energy). We’re also seeing a much more holistic approach to sustainability; with greater focus on tenant/customer engagement around sustainability initiatives, ethical procurement, dedicated real estate to support health and wellbeing, placemaking, and the use of technology platforms as enabler for many of these initiatives.
That being said, there is a lot of room to improve, particularly in the B and C grade commercial office sectors, where a simple and pragmatic approach to sustainability is required.
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