Commercial property commentators call it ‘green credentials’. It’s the ability to display the sustainable features of a commercial property and it has become a large influence in the buying and leasing process for office landlords and tenants.
While there is an authoritative obligation for commercial real estate to uphold green standards, smart landlords own sustainable properties not only to keep government departments and the general public happy.
Cost savings, appeal to tenants, reputation, and property valuation form a few of the factors boosted by having green credentials in order.
We look into the advantages of owning and operating in a green building, and importantly how an asset’s sustainability is measured in Australia.
What’s a NABERS Rating?
NABERS (National Australian Built Environment Rating System) was introduced over ten years ago to measure the environmental performance of Australian buildings. Given a rating between 1 and 6 stars, it is now the industry standard across the nation. So much so that government tenants require a minimum 4.5-star rating before they will occupy a commercial property.
NABERS consists of four rateable elements:
- Indoor Environment
With energy costs and greenhouse emissions rising, the rating system considers the future performance of a building as early as its design phase. A higher NABERS rating gives both tenant and landlord something to boast about.
Financial Benefits of a Green Building
Buildings use 40 per cent of the world’s energy, 20 per cent of the world’s accessible drinking water, and put out almost half of the world’s carbon emissions. With both environment and bottom line in mind, it is no surprise business owners and landlords have a tangible interest in reducing energy bills.
Research by City Switch showed a 5,000 square metre office in a 4.5 NABERS energy-rated building could save a typical professional services company almost $20,000 per year in electricity. Lower occupancy costs bode well with any business and create a great selling point for landlords.
A strong NABERS rating will also remove the need to retrofit a space with energy efficient upgrades. New heating, ventilating, and air conditioning systems are huge outlays for incoming tenants. Businesses and property investors will have an appetite for commercial real estate with these improvements already installed.
Both building owners and tenants have large competitive advantages in displaying healthy green credentials, as it’s almost an Australian expectation to operate in environmentally considerate buildings. Demonstrating corporate social responsibility provides greater market recognition and this can translate to greater market demand.
As we will soon see, there is large value in employees operating in a healthy space as engagement and concentration are highly influenced by surroundings.
A major organisation who understands this is Apple. Recently the company announced that their operations are now officially powered by 100 per cent clean energy. This includes its retail stores, offices, data centres, and co-located facilities in 43 countries. Sustainability has fast become a major market influence of commercial real estate.
Attractiveness to Tenants
A green building will appeal to business owners looking out for employee wellbeing. Healthy staff in a green working environment will produce greater overall output than a workplace with a poor NABERS rating.
Already mentioned was City Switch’s estimated financial impact of a high NABERS energy-rated building on the typical professional services company. Incredibly, the greatest opportunity of cost savings lies in its employees:
- 41 per cent reduction in sick days ($262,014 per year)
- 50 per cent greater employee retention ($824,792 per year)
- 11 per cent increase in productivity ($3,654,755 per year)
Tenants will naturally see green buildings as attractive premises as this directly correlates to lower vacancy rates for obliging and compliant landlords
Understanding how to ensure, maintain, and build value in today’s culture goes a long way toward a prosperous commercial property investment. Garnering this expertise is a direct benefit to you of investing alongside us. Get in contact with us for more information on becoming a Properties & Pathways investor.