Sustainability and property

August 31, 2010 | Sustainability | Research

Companies are jumping back on the green bandwagon having recognised the numerous financial savings achievable by running more efficient real estate, according to the Colliers International Sustainability White Paper, entitled 'Is going green still the right way for property?', Winter 2010.

Simon Cox, Head of Sustainability for Colliers International who co-authored the Paper, said following years of economic turmoil, which resulted in sustainability taking a back seat and with the impending introduction of the Commonwealth CBD Scheme mandating disclosure of commercial office building energy efficiency, going green is back in vogue.

"Prior to the economic downturn, green initiatives were being driven by a passion for the environment, however, sustainable practices have now become an imperative for the wider business community for a host of reasons, mainly concerned with the economic bottom line," he said.

"Companies are realising that significant benefits can be relatively easily unlocked, with prudent management practice leading to financial and reputational benefits, in addition to environmental benefits."

Mr Cox said that although the demand for green credentials in a building has been driven by larger occupiers in CBD markets, smaller occupiers in both CBD and suburban locations are also increasingly looking to higher levels of sustainability in the buildings they occupy.

Nerida Conisbee, Colliers International Director of Research, and Sustainability White Paper co-author with Mr Cox, said the statistics around the impact office buildings are having on the environment are alarming.

"About 10 per cent of urban water consumption and greenhouse gas (GHG) emissions are from Australian office buildings, with this figure increasing by three to four per cent each year," she said.

Ms Conisbee said energy costs are rising and this rate of change is set to increase in the future.

The NSW Independent Pricing and Regulatory Tribunal (IPART) recently announced that standard electricity tariffs are set to increase by between 42 per cent over the next three years in that state and the future introduction of a carbon trading scheme will increase costs further.

"There is no doubt that increased efficiency in energy usage will reduce costs for companies, with tight energy management estimated to improve the rating of existing older buildings to 3.5 to 4 stars, with capital expenditure required to improve the rating beyond this,"

The Low Energy High Rise Building Project prepared a report in March 2009 which found that a number of factors led to lower energy usage, including current building technology, Building management team members feeling they can influence building efficiency and energy efficiency training and skills.

Ms Conisbee said it follows that lower consumption of energy, water and reduced waste outputs, increased productivity of occupants and lower impact materials should all result in better financial performance."

"Whilst new buildings can reap these benefits relatively easily, with most rating at least five star Green Star, existing buildings may need to improve management and operations practices to realise savings," she said.

According to Colliers International's recently released Office Tenant Survey operational cost savings and Corporate Social Responsibility were the most cited factors driving tenants' decisions to occupy a green building.

The Survey assessed 351 decision makers leasing commercial property, who occupy space of 500sq m or more in the head office locations of Sydney, Melbourne, Brisbane, Adelaide, Canberra, Perth, Auckland and Wellington.

"Fifty-three per cent of organisations think there is strategic value in occupying a green building and would be prepared to pay more rent for this merit, while a majority of those who disagreed cited they were not willing or able to pay a higher rent and also that there is no recognition from clients/public to validate the value," Ms Conisbee said.

Ms Conisbee said from talking to major corporates, it's clear they see cost savings and benefits in not only reduced energy consumption, but also other factors such as increased productivity, decreased employee turnover, less sick leave and better morale.

Mr Cox said that in order to reap the financial rewards, much of what companies should be focusing on involves good old fashioned property management.

"Twenty years ago it was a natural for companies to match operating parameters to the occupancy needs of tenants," he said.

"However, during the 1990s there was a definite shift towards managing tenant relationships and risk management, often at the expense of property management fundamentals."

"Today the industry has come full circle and operations management is a priority once again, where companies are investing in their operations and facilities management employees as they are seen as an invaluable asset," Mr Cox said.

Mr Cox said regulations such as the CBD Scheme, power price increases, and tenant demand are driving property owners and managers to monitor and report environmental performance as a routine part of their responsibilities.

"Excellent property management practices will ensure that the energy, water and waste management programs previously described are well applied; conversely, poor attention and execution in these areas will deliver higher operating costs, and a loss of competitive advantage," he said.

In early 2010, Colliers International launched a powerful new web-based environmental management system which acts as a one-stop management solution - branded Envirometrics Utilities Management - for the corporate real estate sector, developed in partnership with CarbonSystems.

"Envirometrics provides a graphic data interpretation of utilities consumption, helping building managers and owners better manage their building's environmental performance and meet compliance based reporting requirements," Mr Cox said.

Mr Cox said that savings of up to 10 per cent have been easily achievable by using this tool.

From November 2010, the CBD Scheme will require mandatory disclosure of energy efficiency ratings for commercial buildings. The legislation requires building owners to provide up-to-date energy efficiency information when they sell or lease office space that is greater than 2,000 square metres.

According to the White Paper, the introduction of mandatory disclosure will increase the visibility of buildings with low ratings and may lead to a situation where buildings with particularly low rating are more difficult to lease, particularly if buildings with similar rents but higher ratings are available.

Back to listing