2024 NABERhood Watch

Energy efficient buildings are becoming an increasingly important area of consideration for office landlords and office-occupiers making sustainability related leasing decisions. Our third analysis has been updated to reflect the latest rents, yields and occupancy premiums associated with offices which have higher NABERs ratings. 

Key Points: 

• Over three quarters of office stock is NABERs rated
•  53% of NABERs rated office stock has a rating of 5 Stars or above. This has grown by 22% since 2017.
• Age is no barrier. 44% of offices constructed before 2000 have been upgraded to a 5 Star rating or greater.
• Opportunities: The largest proportion of Premium (41%) and Grade A (32%) offices are rated 5 Stars. These assets represent opportunities for improvement.
• Energy costs make up 10-15% of operating cost of an office building. Premium and Grade A offices have lower energy costs as a percentage of rent by 1.0-1.4%.
• 12% higher occupancy. Offices with 5.5 and 6 Star ratings are at 88% occupancy compared to 4 Star office buildings with 76% occupancy.
• 1-5% rent advantage. We find rents to be 1%-5% higher amongst 5.5 and 6.0 Star rated CBD office buildings.
• Valuation premiums/discounts. We find a slight correlation between cap rates and NABERS ratings. Average cap rates for 6.0 Star buildings have a slight premium and average cap rates for 4.0-4.5 Stars have a slight discount. Cap rates and yields are also impacted by location and cashflow strength.