22 July 2010 – FAVOURITES : Tackling the fundamental problem of carbon emissions from older style buildings is one of the key issues for the property industry. However, one Australian fund manager has proved that existing buildings can be upgraded to target a five star NABERS energy rating at a fraction of the costs cited by many property analysts.
Local Government Super controls six office buildings in Sydney, all of which have been managed by CBRE for the past eight years. Under its Sustainable Portfolio Program, LGS has significantly improved the energy efficiency of its office assets and, in more recent times, has made some exponential leaps aided by the Federal Government’s Green Building Fund grants.
Assisted by consultancy firm Napier & Blakeley, LGS successfully applied for six GBF grants – including one which has allowed it to make a bold and highly visible environmental statement at 2-4 Lyonpark Road, Macquarie Park.
In contemplating how to attract and retain tenants in a highly competitive market, dominated by large IT and high tech companies, the fund has elected to supplement some of the more conventional energy efficiency initiatives around lighting and airconditioning with an unmissable green statement – an AU$680,000 bank of solar cells on the roof of the building. It is one of the largest ever to be installed on an Australian office property.
According to LGS chief executive officer Peter Lambert the LGS expects the payback from the solar initiative will be achieved in less than 10 years while giving LGS a significant advantage in regard to the building’s branding and tenant retention.
The sustainability initiatives were intrinsically tied to the fund’s philosophical view on socially responsible investing under a strategy that was first implemented in 2003.
Last year, LGS was awarded a Green Globe award for Commercial Property Sustainability by the NSW Department of Environment and Climate Change in recognition of the fund’s efforts to actively reduce its environmental footprint.
“It’s only in recent times that technology has allowed us to take that extra step,” Mr Lambert said.
One of these new technologies is the Shaw Method of Air Conditioning (SMAC), which LGS calls its “silver bullet” for older style buildings.
LGS is the first building owner to introduce the technology into a NSW office property to control humidity and temperature. In combination with best practice mechanical services engineering these systems are expected to achieve 15-49 per cent energy savings.
“SMAC gives you a big leg up and that last star you’re trying to achieve when it comes to your NABERS ratings,” according to CBRE senior engineering manager Geoff Hilbourne.
The next step for LGS will be an exemplar project at 76 Berry Street, North Sydney for which the fund was recently awarded an AU$2.1 million GBF grant.
The grant will contribute to upgrade works to reduce total building emissions by around 80 per cent, with the aim to deliver the lowest emissions per square metre for an office building in Australia. This level of emissions will be approximately 70 per cent below that required for a 5 star NABERS rating. For tenants, the works will lead to an estimated one-third reduction in their electricity bills.
The property in question is a 24-year-old building which will be upgraded to become the most efficient commercial office building in the country, using leading Australian technologies,” says Lambert.
Specifically, the project will involve the installation of e1 lighting technology, which will reduce lighting energy by approximately 66 per cent. The project will also involve an upgrade to SMAC and the installation of Bennett Clayton tri-generation engine technology to provide on site, low emission electricity, heating and cooling.
Each building in the LGS portfolio now sources 100 per cent of its base building energy from fully accredited green power, reducing emissions by approximately 10,000 tonnes of carbon dioxide per annum. All new leases require tenants to source their power from green energy suppliers.
More importantly, the GBF grants have allowed LGS to move beyond the use of proven technologies – the “low hanging fruit” – to trial innovations such as SMAC. In the process, LGS has taken its buildings from 3.5 – 4.5 star NABERS ratings in what is predominantly a 1980s portfolio to be on target for 5 star ratings – a level not being achieved by some new developments.
“Most of these works would have been financially viable without the GBF grants but they wouldn’t have been completed within the same time frames and, more importantly, they’ve given landlords such as LGS the confidence to invest in newer technologies by reducing the risk profile of their investment,” sad Napier & Blakeley’s head of sustainability, Roger Walker.
For LGS, the initiatives are starting to be reflected in capital values and will significantly delay the obsolescence factor within its portfolio. Noteworthy is the cost at which LGS has been able to green its portfolio. Mr Walker points to the fact that LGS has been able to introduce its sustainability initiatives at a cost of AU$50-$140 a square metre – some 30 per cent below the costs cited by many analysts.
The LGS portfolio involves Sydney CBD buildings at 28 Margaret Street and 120 Sussex Street, alongside North Shore properties at 181 Miller Street, North Sydney; 100 Christie Street, St Leonards; 76 Berry Street and 2-4 Lyon Park Road.
CBRE has managed the implementation of the LGS green initiatives – educating tenants on the benefits and ensuring the fund’s buildings remain tenanted during the process.
Initial independent productivity studies for four of the six buildings have demonstrated a 2-10 per cent improvement in occupant productivity.
According to Mr Lambert: “The energy savings we’ve achieved have allowed LGS to increase tenant attraction and retention and provide a more productive working environment for our tenants. At the same time we’ve been able to improve our NABERS ratings to future proof our portfolio by reducing our future capital expenditure, improving rental demand and increasing the value of our buildings.”
This is an edited version of an article that was first published in CBRE’s Property Edge
Rebecca Pearce is CBRE head of sustainability, Pacific