Eco-friendly Buildings Have Higher Value – Sept 2011

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Green office buildings are valued higher than other buildings, the first significant Australian report on the subject has shown.

Office buildings that rated highly using either the National Australian Built Rating System (NABERS) Energy or Green Start schemes also have lower vacancy, outgoings, incentives and yields, building a stronger case for landlords to invest in sustainable development.

The study quantifying premiums for green office buildings was released yesterday by the Australian Property Institute (API) and Property Funds Associates of Australia (PFA).

The research, undertaken by the University of Western Sydney and the University of Maastricht in the Netherlands, looked at green office buildings in Sydney and Canberra, which were benchmarked against non-green office buildings.

The Building Better Returns report said a five-start NABERS Energy rated building delivered a 9 percent value premium to those buildings without ratings.

In Canberra. A five-star building had 21 percent premium in value while Sydney CBD office buildings recorded a 4 percent premium. “We’re seeing that as you increase NABERS Energy ratings, we’re seeing increased green premiums across all parameters,” University of Western Sydney professor Graeme Newell said.

But once office buildings dipped below a three-start NABERS Energy rating, the premiums disappeared, he said. “If you’re in the lower space, your properties are going to be at a discount, particularly in value and rent.”

In Sydney’s central business district, lowly-rated office buildings had a 10 percent discount in value and in Canberra a 13 percent discount.

Discounts in rents were seen for lower NABERS Energy ratings, Sydney CBD buildings saw a 9 percent discount and Canberra saw a 6 percent discount in rents.

The Green Building Council of Australia, which developed the Green Star rating system, welcomed the report. Council chief executive Romily Madew said: “A range of international reports have confirmed that green buildings positively impact everything from operational costs to return on investment and from reputational equity to productivity.

“However, until now, we haven’t had enough data to demonstrate what we’ve known anecdotally or some time”.

The Australian report came about after a workshop at the API and PFA’s Sustainability Conference in 2009. Nils Kok, a professor at Masstricht University. Had co-authored Doing Well by Doing Good; Green Office Buildings and wanted replicate the research in Australia.

 

“As Green Star and NABERS ratings disseminate in the commercial property sector, this study can be expanded further to answer some of the questions that remain open,” Dr Kok said.

Dr Newll said the Australian Results were strikingly similar to those in the US.

In the US report, green buildings recorded an 11 percent premium in value and a 6 percent premium in rents – both almost in line with the Australian findings on Green Star rated buildings.

Source: Australian Financial Review – 13 September 2011

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