One Shelley Street

26 July 2012 – When the Macquarie Group moved into its new headquarters in One Shelley Street Sydney the company estimated employee salaries accounted for 85 per cent of its business costs. Building and construction costs? Just 6.5 per cent. No wonder then they were keen to measure the impact of the new building on productivity. Yet three years down the track productivity metrics are still the poor cousin of energy efficiency ratings and tools. This is the next big challenge for the property industry say IEQ experts.

This was a key point of debate at the Healthy Buildings Conference 2012, held in Brisbane from July 8 to 12 (see our article on the conference). Central to discussions on indoor environment quality, or IEQ, was the need to establish metrics to rate the impact of IEQ on occupants.

Richard de Dear, Head of Architectural Design Science at the University of Sydney and Vice President of the Healthy Buildings 2012 conference, told The Fifth Estate the growing importance of indoor environment quality was a dominant topic at the conference, which this year attracted 650 delegates. Half were from the Asia Pacific region and the remainder predominantly from northern Europe and the US.

According to de Dear, while energy efficiency continues to dominate a lot of the thinking in the design and management of buildings, driven largely by legislation and readily available ratings tools, the impact of IEQ is a now key focus. But the industry is a long way from establishing a universally accepted measurement of the link between IEQ and productivity.

“IEQ is emerging as a major area of interest. When we talk about green buildings we talk about whether they are good for the environment and whether they are good for occupants’ health and wellbeing. We’ve managed to successfully introduce rating tools for the environmental and energy efficiency side but there is nothing as recognisable or readily accepted for measuring healthier buildings,” says de Dear.

The National Australian Built Environment (NABERS) IEQ tool has had poor uptake, says de Dear, largely because it is prohibitively expensive and the industry “doesn’t know how to use the ratings.”

“A NABERS five star energy rating has recognisable commercial payback but IEQ doesn’t have the same meaning. There is a lot of pressure to convert IEQ quality to productivity but nobody has nailed this measurement scientifically. Nobody has come up with a widely accepted metric which shows that if you spend X amount on IEQ you get X amount of increased productivity,” de Dear says.

Richard de Dear

De Dear’s research team at the University of Sydney is focusing on measuring health and wellbeing improvements as a result of better IEQ, rather than productivity. According to the University of Sydney’s website it is one of only three universities worldwide undertaking major research into IEQ, the other two being Copenhagen and Berkeley.

“We’re being pragmatic – we’re saying you can’t quantify productivity changes but what we can measure, and have done so, is comfort and wellbeing,” says de Dear.

GBCA supports link between IEQ and productivity
Andrew Aitken, executive director of the Green Building Council of Australia’s Green Star rating system, and a speaker at the Healthy Buildings conference, says developers and building occupants increasingly focus on improvements to IEQ as a way to increase productivity. Attitudes to the importance of IEQ have changed dramatically over the past few years, Aitken says.

“A few years ago IEQ as part of Green Star was seen as too hard by many. Now it is recognised that IEQ is about the things that have real value. Productivity of staff is the main game. Increasing water efficiency is great but water isn’t a high cost item to a business whereas people are.”

The GBCA also highlights the link between productivity and IEQ in its educational material and ratings tool descriptions.

“Better indoor environment quality does result in better productivity and improved health and wellbeing. We hear from scientists about the tenuous links between productivity and IEQ but there are lots of studies that show increases in productivity, increased recovery rates in hospitals and increased spending rates in retail centres following improved indoor environment quality,” Aitken says.

“Scientists haven’t agreed on a way to measure productivity increases in green buildings and they’d like to see more work done on it. It’s true there are no universally agreed metrics for productivity improvements but the scientific argument doesn’t affect what everyone is doing in their buildings.”

The GBCA is also in discussion with NABERS to enable alignment of NABERS IEQ ratings tool and the Green Star – Performance tool, currently under development.

“Uptake of the NABERS IEQ tool hasn’t been great – it is possibly a bit complex. I know they are doing work on it so we can’t really engage until that is done but we are continuing to discuss it,” Aitken says.

Under the Green Star rating system 30 per cent of points in the tools relate to IEQ, says Aitken. This could change in the future if there is demand from industry for a greater emphasis on IEQ but so far this is not the case.

Brian Churchill

The value of productivity
Brian Churchill, Property Portfolio Manager for Local Government Super has no doubt that improved IEQ means better productivity. In a study conducted by environmental consultants, CETEC, productivity rose by four percent across four of LGS’s buildings following environmental upgrades. They put a dollar amount on the productivity increase of $188 a  square metres.

“Productivity is an issue nobody is running with. All other things to do with energy efficiency you can hedge against energy costs, but with all the efficiency changes you can make you’ll be saving $15 to $20 a square metre. Compare this to $188 a square metre – productivity gives you nine times the benefit,” says Churchill.

The study involved surveying 50 per cent of the buildings’ occupants using a standard IEQ survey from University of California Berkeley.

“They were fairly standard questions about noise, comfort, lighting and temperature. If the temperature is right people work better. The same with lighting. There are certain metrics you can establish. What we found is that there was a fairly good correlation between the improved building energy efficiency and productivity,” Churchill says.

Productivity gains across LGS study group of four buildings: 120 Sussex St Sydney; 28 Margaret St, Sydney; 2-4 Lyon Park Rd, Macquarie Park; 181 Miller St, North Sydney

Floor space34,000 sq m
Projected salaries and occupant costs$160 million
Projected improved productivity annually4 per cent  = $6.4 million
Project cost$3.9 million
Amortisation7.3 months
Productivity gain$188 a sq m

Quantifying productivity – the studies
Other recent studies have also attempted to put some metrics around the impact of IEQ on occupant productivity and wellbeing.

At 500 Collins Street Melbourne, refurbished to a five Star Green Star by owners Kador Group, a post occupancy study found there was:

  • 39 per cent reduction in average sick-leave days per employee per month
  • 44 per cent reduction in the monthly average cost of sick leave
  • 9 per cent increase in the typing speed of secretaries
  • 7 per cent increase in lawyers’ billings ratio, despite a 12 per cent decline in the average monthly hours worked.

At Macquarie Group’s six star Green Star headquarters at One Shelley St, Sydney, a post-occupancy study found there was an average of 15 per cent net increase in perceived productivity for employees who moved to the new building.

Conducted by the University of Technology, Sydney and the University of NSW, the study tracked more than 2500 employees over 15 months as they moved into the new building. It looked at the overall design and occupant experience, as well as the environmental, social and financial stability of the building.

Macquarie estimates that employee salaries account for 85 per cent of its business costs compared to 6.5 per cent for building construction costs and 4 per cent for M & E services, or operations and maintenance.

The new building has an activity based workplace environment and 90 per cent of those people surveyed post occupancy did not want to go back to the old way of working. A total of 59 per cent said they were more productive in the new workplace.

Another earlier project, Trevor Pearcey House in Canberra, owned by Australian Ethical Investment, achieved a 6.2 per cent perceived improvement in productivity, equivalent to more than $300,000 per year in salary costs, according to a post occupancy study. This is estimated by AEI to be around $1.5 million of extra value over five years.

The building was upgraded to six star Star Green Star in 2007 in what was at the time a ground-breaking retrofit of an 1980s building.