Green Down Under
Issue 39 - Mar 08

Australian commercial real estate has seen a paradigm shift towards sustainable buildings. Ashford Pritchard investigates what lessons can be learnt for Asia's fast developing real estate markets.

While markets across North and Southeast Asia are seeing green certified buildings being developed in dribs and drabs, our antipodean neighbours seem to have already transformed the way real estate is developed, managed and perceived. While nowhere near every commercial building available has green credentials, the major players have already taken more than a few steps along the road towards a sustainable built environment.

Metriculating green
"If you were to step back and look like a CBD such as Sydney you'll see that in the vast majority of those buildings the owners of those properties are improving them using ABGR as a metric," says Simon Carter, National Sustainability Leader, Colliers International, referencing the Australian Greenhouse Rating system. AGBR appeared nearly a decade ago as the first benchmarking tool to measure a buildings actual energy performance. A program-based and energy-calculation assessment system, AGBR is based on the actually energy usage of a tenancy, base building or entire structure.

"In terms of the market what we seen has unfolded in several phases," Carter continues, "ABGR was the tool that really started moving things. That was when we first had a metric to be able to compare buildings. The use of ABGR to set benchmarks and improvement targets for existing buildings then gradually becameinstitutionalised." Beyond being a useful building management tool, ABGR also provided prospective tenants a fair, independent analysis of how well, or poorly, buildings were performing.

Following and complementing ABGR is Green Star. Developed specifically for offices by the Green Buildings Council of Australia and now being piloted in retail, healthcare and education, Green Star is a design rating tool and is similar to LEED, HK-BEAM and others (see p32 for more details on building rating tools). It has been tweaked and improved over the past few years, with several different iterative versions. "Green Star in particular has instilled a real sense of competition in the market," Carter explains, "at the premium end of the market we're seeing developers square off and say "your development is only version two six star, where as ours is version three."

Breaking the vicious circle
According to Greg Johnson, National Sustainability Manager - Office & Industrial, Stockland, "Rating systems have caused a market transformation in the way buildings are designed." The fact that ABGR became so widely recognised helped people to understand the concepts behind rating systems, which allowed Green Star to be picked up by the industry very quickly. Developers designing and bringing buildings to the market are trying to attract a buyer or an investor or a tenant and, Johnson says "They know that a 5 star building represents a building that is well-designed, and efficient, and that the indoor environment quality is good. The number of stars alone says a lot about what the building represents."

Initially a big factor in driving this tenant demand was the regional (state) governments, who were one of the first to specify ABGR for all their tenancies. Since then, the main banks have been early movers along with professional firms, such as lawyers, accountants, engineering and consulting firms. The commonwealth government came on board early last year, which is also speeding up the rate of demand change for green rated buildings. From a developer's perspective, Johnson says: "The rating tools are definitely driving the market, they're a form of currency. They are influencing design, so the way you use Greenstar to design your building has a currency in the marketplace.

Relevance and risk avoidance
"In the early days," Carter believes, "brand differentiation was a really strong motivator and early-movers saw an opportunity to use green as a real hallmark of quality." However, this was quickly superseded as a driver as marketing oneself as being environmentally-friendly became de rigueur for new developments. Interestingly, the benefits from energy cost savings also became less and less of a consideration, says Carter. "It's the cherry on the top now, the cost savings are nice to have, but it's certainly not the main driver."

Nowadays the main issue has become market relevance. Green ratings are now included in the voluntary matrix that is used to determine office grades, which has served as a further motivation for developers. "If you're doing a premium grade development right now," Carter says, "it will be six stars or over, and that only came onboard about middle of last year. If you're doing a Grade A development you'd be brave not to do five star or better".

"For our office portfolio, this year every managed building where we have control of energy systems will be AGBR rated. We have also signed a GreenStar business partnership which means every new office development or major refurbishment will achieve a green star rating, with new builds to be 4 stars minimum," Johnson explains. Developers are making these kind of commitments, and the requisite investment, not merely out of the goodness of their corporate value policies, but because they see a real business need to go eco-friendly. Referencing the commonwealth government's 4.5 AGBR benchmark, Johnson points out that, "In certain markets where we have a high percentage of government tenants such as in Canberra, we recognise that it's a real risk for us."

Commissioning and managing green
While new buildings are definitely being designed better, the link between Green Star ratings and better environmentally performance has yet to be conclusively proven, and even AGBR cannot be taken as fundamental evidence that all is well. "The factors that lie behind decision making about sustainable commercial buildings will be a complex amalgamation that may not be welldocumented or transparent," says Kerry Lodge, Associate Director, Savills Victoria. "Office tenants want sustainable and energy efficient properties and are often willing to pay a premium for sustainability," she continues, adding that the majority of Australia's office buildings fall well short of being environmentally sustainable.

There have been some notable examples of Green Star rated buildings that have not delivered, and even when developers do aim for environmentally friendly buildings there are still a shortfall between goals and the cost of achieving them. "The continued difference between what the industry wants and what it is prepared to pay for shows there is still a real need to deliver tangible results in terms of sustainability," Lodge believes, "some occupiers are still not recognising the value of sustainable practices as a way of improving overall real estate performance."

Johnson agrees that there are still barriers to overcome. "For some companies they have to be seen to be in a green building and they abandon those values once they get in there. The lesson we're starting to learn is that it's really critical firstly that when a building is designed and is modeled to perform under certain conditions, it is then commissioned in accordance with how it's being modeled and in the actual operation."

Going forward
Despite these shortfalls, there's no question that Australia is a market that has engaged with sustainability. AGBR is currently being incorporated with the National Australian Built Environment Rating System (NABERS) which also included ratings for water consumption and from April this year, waste management and indoor environment. "There's no market in the world that has transformed as quickly as Australia," says Carter, who believes that Asian market will swiftly overtake this pace of change. "It's an explosive issue that's going to drive the markets well into the future, the number one message is don't get caught out. Don't be the only developer with a non-green building when your competitors have gone green and multinationals are entering the market."

Johnson echoes this sentiment, adding that developers have firmly grasped the impetus to achieve on environmental performance. "In the future, governments will require companies to report their emissions. Going forward in a carbon economy, if you're not designing, managing and monitoring the performance of your building in terms of carbon emissions then you run the risk of obsolescence, the demand for your buildings will drop away and they will lose value. RFP

Don’t be the only developer with a nongreen building when your competitors have gone green and multi-nationals are entering
the market

NOMINATE NOW

Subscribe Now

Sign Up for Ezine

Past Issues