Total Property - Issue 3 2017
By Bayleys National Director, Commercial John Church
An important part of staying ahead in the competitive business of selling and leasing commercial property is being aware of and reacting to shifting trends and influences at play in the market.
It’s easy to be dismissive and cynical about current buzz words such as “sustainability” and “environmental responsibility”. However, it is likely buildings that exhibit these features will move further up the commercial property check lists of both tenants and investors in the years ahead.
The trend towards greener buildings is at this stage largely being led by big corporate occupiers and institutional developers and landlords. These businesses have increasingly comprehensive environmental and social policies and need to be seen to be implementing them.
To date, New Zealand has been a relatively slow adopter of green buildings, even though the New Zealand Green Building Council (NZGBC) introduced a Green Star rating system over a decade ago. Its use has mostly been confined to large new office buildings, mainly in metropolitan centres, with bigger developers such as Goodman, Mansons and Precinct now offering a 5 Green Star rating as an integral part of their tenancy package.
Green Star ratings and the associated NABERSNZ energy efficiency rating have yet to gain much traction in the retail and industrial property sectors or at the smaller to medium sized end of the office market. This is despite the fact that new buildings increasingly have standard “green” features, either now required by the building code – such as double glazing – or incorporated by their designers at little or no cost premium.
This therefore begs the question why more landlords aren’t utilising these rating tools given the benefits they could potentially provide in profiling their properties to tenants and investors. It could be because the benefits haven’t been effectively quantified and communicated and/or the tools are too complicated and not clearly understood.
In this regard, a recent survey undertaken by Bayleys Research in conjunction with the NZGBC has thrown up some pertinent observations. Such surveys tend to produce fairly predictable answers, but the response to a couple of questions should raise some “must try harder” flags for the NZGBC.
One was a question to Bayleys’ tenant database, which asked whether they automatically associated green buildings with potential for opex savings. Over half (54 percent) said no. This must be a concern given that outside of Wellington most tenants are on net leases and pay opex.
The savings that can be made by the implementation of a relatively straightforward and affordable energy management measurement tool such as NABERSNZ are only now being calculated and are impressive. For example, its use by Precinct Properties in refurbished Zurich House has resulted in a 45 percent improvement in energy performance over the past three years.
The challenge now is to spread the use of NABERSNZ and Green Star ratings beyond just the big end of town. This will require more case study evidence on savings and benefits across a greater range of building sizes and types.
The reality is that New Zealand has only a small number of tenants that want or can afford to be located in a new large Green Star rated building. By far and away the biggest gains in improving our built environment can be made by recycling an oversupply of aging commercial buildings.
Encouragingly, NZGBC seems to be responding to market signals. It is to phase out the overly complicated and not well understood “design” and “built” Green Star rating categories next year, replacing them with a more straightforward and transparent built and interior rating system. It is also developing what it says will be a suite of lower-cost, simpler rating tools with a more wide-reaching scope. That might help provide the impetus needed to make our commercial property landscape a much greener place.
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