The property industry represents one ninth of Australia’s GDP (the largest of any sector), employs 1.1 million Australians (more than mining and manufacturing combined) and generates $72 billion in tax revenues to fund community services. This means that sustainability in the real estate sector affects a lot of people and businesses.

We commonly speak of sustainability at the residential level. It is common to hear about recycling, rain water harvesting and Energy alternatives for homeowners. But what about sustainability in the commercial real estate industry? Large business centres are inhabited by thousands of people during the work hours.

Large business centres are inhabited by thousands of people during the work hours. Business areas are high on energy and water consumption. Over the years, businesses have understood that going Green isn’t just a philanthropic decision. There are many cost benefits to it.

Advantages of Sustainability

1. Operating Efficiencies

The easiest way for a Commercial Real Estate building or property to start their sustainability journey is to register as a Green Star Project. Green Star is Australia’s mark of quality for the design, construction and operations for sustainable buildings, fitouts and communities. Green buildings are designed to be highly energy and water efficient, which makes them cheaper to operate.

• Green Star buildings consume 66% less electricity and 51% water than the average Australian building
• Research and modelling shows that a business operating from a 5 star Green Star-rated office of 5000 square metres saves $18,200 a year on electricity alone
• Green Star-rated buildings have proven benefits on employee health and morale, this converts to massive savings in reduced absenteeism, employee retention and increased productivity
• Studies have shown that upfront costs to support green design can result in a saving that is 10 times the initial investment

2. Higher Return on Investment

Green buildings deliver consistently higher returns on investment compared to their non-green counterparts.

• Reports have shown that a Green Star-rated building demands a 5% premium in rent and delivers 12% in value through ‘green premium’ when compared to a non-rated building
• With higher levels of certification price premiums for green buildings can even go up to 30%

A Shining Example in Sydney

The Commonwealth Bank Place at Sydney’s Darling Quarter is the largest commercial office development in Sydney’s Central Business District. It is a great example of social, environmental and economic sustainability.

The design include a high-performance façade, energy-efficient lighting, heating, ventilation and air-conditioning, rainwater harvesting and reuse, as well as trigeneration and onsite blackwater treatment systems.

The Green Building Council of Australia states that the Commonwealth Bank Place “generates 50 per cent less greenhouse gas emissions than an average commercial office building and consumes 80 per cent less drinking water.  This is equivalent to taking 680 cars off the road and saving 13 Olympic swimming pools of water each year.”

Managing director of Lendlease’s Australian Investment Management business Kylie Rampa said “the rating was in line with co-owner Australian Prime Property Fund (APPF) Commercial’s focus on next generation, highly sustainable commercial assets.”

“From an ownership perspective, a better performing building delivers a number of direct economic benefits to stakeholders including more productive workplaces and precincts which generate greater value,” she added.

Sydney’s Energy Efficiency Master Plan

As part of the Sustainable Sydney 2030, the city of Sydney has developed various methods to ecological improvement plans. The Energy Efficiency Master Plan “could significantly reduce energy usage and slash nearly 2 million tonnes of carbon emissions a year city-wide by 2030.” Through proactive steps and practical targets of clean and sustainable energy, Sydney can save more than $600 million in energy bills across the city and double energy productivity.

cityofsydney.nsw.gov.au states that their research “shows greenhouse gas emissions across the city’s buildings sector could be reduced by more than 30%. Detailed analysis in the plan calculates undertaking the energy efficiency measures would cost around $396 million, resulting in savings of $604 million, meaning a net benefit of $208 million.”

What is important to note is that in Sydney alone, five sectors account for over 3 quarters of the city’s energy usage. This includes non-premium office buildings, A-grade office buildings, apartments, accommodation and car parks with air-conditioning, lighting, and equipment using the most energy. While residents and businesses are now more restrained about their energy use this is primarily because of the price rises. To achieve the lower emission goals it is important for the city to be able to implement aspects of their Sustainable Sydney 2030 plan.

The plan enumerates that “The benefits of energy efficiency include reducing emissions, saving precious resources and the creation of hundreds of jobs. The plan shows that by 2030, total energy and greenhouse gas emissions could be one-third lower than they were in 2006 – even as Sydney’s economy and population continue to grow. The energy efficiency master plan could achieve almost half of the City’s emissions reduction target.”

Current Sustainability Trends in Commercial Real Estate

A real feather in Australia’s cap has been that it has been a world leader in real estate sustainability for many years. Australia and New Zealand have been pioneers in terms of practices in environmentally conscious design, promoting environmental management, social impact and governance and accountability practices.

The Global Real Estate Sustainability Benchmark said companies operating within Australia performed significantly better than other markets. The GRESB also unveiled a “scorecard to assess the performance of entities involved within the corporate real estate space against a range of criteria which are commonly seen to comprise the notion of corporate social responsibility”

Australia and New Zealand achieved an overall average score of 74 points out of a 100 – which is well above the international average of 60.

Including a holistic understanding of sustainability in management, identifying risks and opportunities, policy and disclosure, stakeholder engagement and monitoring and energy management systems, Australia has been a leading example much ahead of the world market.

Through widespread and diligent efforts companies have been able to slash carbon emissions, energy usage and water consumption by 5.4 per cent, two per cent and 0.7 per cent respectively.

Australian companies have shown great competence in carbon management performance. Companies are proactively putting data management systems in place, including carbon emissions in environmental, social and governance policies, incorporating carbon emissions reading into due diligence practices, reporting on carbon emissions data and having carbon emissions targets in place.

Green Leasing

Companies are also keenly aware of the advantages of reduced energy costs. A number of corporate tenants are actively seeking to improve the environmental performance of premises which they occupy.

Sourceable reports that “clauses included in a green lease can include the attainment of energy performance measures (i.e. NABERS, Green Star), separate metering to enable the tenant to monitor their own energy usage, a committee to monitor the building’s environmental performance or new practices which will deliver improved outcomes in terms of sustainability measures.”

Advocacy in the Property industry

The advocacy group Property Council of Australia has been pioneering the case for sustainable development. Aside from the direct benefit of the environment, sustainable development also helps attract capital.

The Property Council of Australia has been advocating sustainable development through five key policies:

• “An ambitious national plan towards net zero emissions buildings by 2050 with staged targets for emissions and energy that will help Australia meet our obligations under the Paris Agreement
• Reforms to our energy market to support and incentivise the broader uptake of cost effective energy efficiency and distributed energy such as rooftop solar
• Strengthened and harmonised white certificate schemes across Australia with a trajectory towards a single national scheme, enabling building owners to trade their demonstrated reductions in energy consumption
• Targeted incentives for buildings that invest in energy efficiency and clean energy such as accelerated depreciation, planning incentives, stamp duty concessions and differential rates
• Modernisation of the National Construction Code with higher energy efficiency standards and a trajectory for future increases”

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