Australia NABERhood Watch 2023

Energy efficient buildings have enduring premiums.  We’ve updated our analysis 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
• 54% of office buildings are now 5 Star and above rated.  This stat stood at 35% in 2019 as landlords continue to invest in improvements across their portfolio
• Age is no barrier.  43% of buildings that were constructed pre 2000 have been upgraded to at least 5 Star rating
• Specific opportunities.  39% of Premium buildings have a 5 Star rating and 26% of Grade A buildings have 4 Star or 4.5 Star rating – these assets represent the next set of opportunities for improvement.
• 10-15%.  Energy costs make up 10-15% of operating cost of an office building.  In today’s high energy cost environment, the business case is easier to justify.
• 7% higher occupancy. Office towers with 5.5 Star and 6 Star rating enjoy a 7% occupancy advantage to their 4 Star peers.
• 2-4% rent advantage.  We find 2%-4% higher rents for each notch of higher NABERs rating, comparing buildings within each city CBD location.
• Valuation premiums/discounts. We find a slight correlation between cap rates and NABERS ratings. There is a slight premium for 6 Star rated buildings and a slight discount for 4.0 Star rated buildings. Valuations are also impacted by location and cashflow strength.