On subversive moves… where you wouldn’t expect them, Glenn Murcutt and nature and the dreaded power of the agent
There are some subversive moves afoot right now. If you’re a brown laggard that is.
There’s the novel idea of rejecting a tenant because the company has some question marks over its green or ethical credentials and could pose a risk to the brand of the asset, not to mention to the other tenants. Bring the tone down, if you know what we mean. It’s called risk management. And don’t you love it?
And gathering momentum amongst a few influential people is an interest to push for minimum performance standards in buildings.
According to AMP’s Emlyn Keane, head of property management and sustainable performance at AMP Capital Investors, it’s not some wild idea, and he’s seen some significant support for minimum standards in some influential places.
Personally Keane doesn’t agree. He feels the market could deliver the goods and has delivered the goods.
“I think the market is the market – I don’t believe you have to have minimum standards. The market has shown it’s attracted to high performing assets, demonstrated by the IPD [green property index] returns,” he says.
“We should be able to evolve our assets. I don’t see the need for a minimum.”
Sure this has worked at the premium end but what about the B and C grade buildings, where the consensus is that property owners are unengaged and pretty well uncaring around sustainability and energy efficiency?
Keane thinks there, too, the weight of market logic will soon play its part.
Slower demand will bring action
As the demand for leasing slows, he says, owners of lesser quality buildings will start to feel the pinch. Buildings with lower energy costs will be more attractive and with rising electricity prices this is likely to be a significant driver.
A better idea would be to have some government incentives to help improve the performance of buildings. A kind of Green Building Fund Mark II.
The Coalition’s proposals for direct action might offer one solution, he said. Perhaps a fund across the whole industry that rewarded lower emissions.
After all buildings offer the fastest, cheapest options for greenhouse gas reduction.
Keane thinks it could work if the industry put together a business case to show how taxpayer dollars could be invested in the building sector to show good returns on emissions reductions.
Evolving the assets
The comments emerged during a chat to discuss what AMP’s property outfit was up to.
Keane reported he was feeling pleased in recent times with the performance of the portfolio of property he looks after, the AMP Capital Wholesale and the Australian Core Property Portfolio, which now averages 4.5 star NABERS energy rating.
In 2007 the average was 1.6 stars.
“We set a target of ½ a star a year over five years,” and that’s what’s been delivered.
And 4 ½ stars is just about right, he says. You don’t always need to shoot to five or six stars to do well, Kean says, it’s all about the appropriate, responsible investment.
Each of the buildings was looked at in terms of its market position. In some cases perhaps a 4 star rating was optimum.
The question is, “What is the optimum investment versus the outcome? It’s about working with what you have.”
The strategy was to fit in the upgrades along with the regular life cycle of the plant and equipment.
“We wanted to evolve the upgrade progressively in line with the life cycle of the assets without have to overspend.”
It was also about not throwing out plant and equipment with all its embodied energy for the latest new model.
At AMP there’s been a shift in focus on sustainability. “We don’t call it sustainability now, we have ESG [environmental and social responsibility], so it’s now looking more at risk around ESG and responsible investment and looking after investors’ money. Not chasing 5.5 and 6 star [necessarily].”
Tenants who bring down the tone
Interestingly that risk management strategy led to rejection of a new tenant because their environmental profile was viewed as a risk, both to the brand of the building and the other tenants within it.
Keane says, “We applied this matrix and thought this tenant could bring on some protest groups.”
“It’s not ethics. It’s not making a moral decision. If we put a certain type of tenant in a particular asset it might diminish the value of that asset.”
There’s nothing radical or new about this, Keane points out. It works very well in shopping centres.
This is also important for AMP’s investors. The move now is towards greater transparency, with ideas such as data rooms where investors can catch up with the company’s activities.
“This is risk management. I’m not saying we wont go into it [an activity] but we will quantify the risk.”
The agent factor
How much power do agents have, exactly?
In another conversation this week, this time with a leading architect, we discovered a cursory word from the agent made the developers force a major change of style and colour on the bathrooms of a commercial development.
Nah, said the agents, no-one likes black bathrooms. Make them white.
Done, said the owner.
It’s nice to get out of town sometimes, to let your eyes see further than the next building. To see green grass and trees and hear silence, interrupted only by birds and the crackling bush. If you think something happens to your brain when you’re in such an environment, it’s not your imagination.
On such a trip last weekend to Bundanon on the South Coast, which artist Arthur Boyd bequeathed to the people of Australia, a talk by one of Australia’s favourite architects, Glenn Murcutt and visiting American social ecologist Stephen Kellert was exactly about that subject. And how nature can interact powerfully with the built form to counteract what Kellert, alarmingly, said was the latest illness in the US – nature deficit syndrome.
There was no sign of a deficit from nature on Sunday. And every hint why Arthur Boyd became enamoured of the area.
TedX Sydney executive producer and producer of ABC Radio’s By Design Program Janne Ryan was host to this brilliant talk about humanity’s need for connection to our environment.
More on this soon we hope.