John Preece

By Tina Perinotto
25 January 2013 – Knight Frank national director John Preece is not exactly upbeat about the economy this year. What he does see are people edgy to get a move on with their lives.

In an interview to canvass prospects for sustainability work in the hardnosed world of the commercial property market this year, Preece sees a patchy outlook.

He works nationally with both tenants on the corporate advisory side as well as with the landlords in the project management business. So he has a view on the outlook for capital expenditure, or capex, for base building upgrades as well as for fit-outs. And he knows what the mood is towards Green Star and NABERS ratings.

“I can’t see a huge change in the economy to support major change in the office sector, but there are a lot of people who have sat on their hands and are now starting to do something,” Preece says.

“For business relocations there’s a touch more confidence around. Not a huge amount. But businesses still have to function and people are starting to do things regardless of the economy.

“That’s not consistent across all the markets. And not as much with firms that have to report to Europe and America, [such as in Sydney]” Preece says.

In Brisbane the outlook is not at all good. Vacancy rates are at 8 per cent and there have been between 15,000 and 16,000 government jobs slashed throughout the state thanks to new premier Campbell Newman.

Then there’s the slowdown in mining.

“On the face of it, it looks really bad but what happens is incentives will go up and for businesses who are going well, and it will promote a bit of movement around the market,” Preece says.

In Victoria and Melbourne, it’s “steady as she goes”

“Nothing too exciting will happen this year.”

There has not been “masses of development” in Melbourne so Preece does not expect the office market to get much worse.

In Perth there is now a touch of vacancy in the market, “but not much compared with the rest of the country.”

“The sentiment still pretty upbeat.”

So what about sustainability?

Preece says in the premium CBD market there is no question that owners and tenants want NABERS and Green Star ratings, but the demand for Green Star thins once you move outside of the premium areas.

“Landlords are comfortable around NABERS, especially when they are pushed hard by their tenants.

“If it’s a shiny glass box in the CBD, then Green Star is a matter of course.

In areas such as North Ryde, north west of Sydney, it gets patchy.

Preece says tenants outside of the CBD might push for a “reasonable NABERS rating”, but most they are not demanding Green Star  “and no landlord is going to do it as a matter of course because it’s very onerous.”

However for Goodman’s three office buildings under way at North Ryde, each with about 10,000 square metres, for Canon, Fujitsu and Optus,  two will target Green Star ratings.

According to Goodman’s group head of sustainability, James Vesper, Fujitsu will target 5 stars Green Star and Canon will target 4 star for both office and design ratings. “Both are currently going through the registration process,” Vesper says.

“With the Optus development, it seemed a rating was too difficult as the new development is physically linked to the existing older building on the site. We did investigate but it wasn’t clear if the tool could compensate for this structure.”

Still the Green Building Council’s market transformation is evident.

Preece says tenants are often building fitouts to Green Star standards, but falling short of certification.

“When you look at what tenants are doing for themselves – generally what I’m seeing is tenants prepared to invest in NABERS and designing their fitout in according with Green Star principles but they won’t invest the extra $100,000 into getting it certified.”

They buy the right materials, they invest in energy efficiency, they get recycled materials, they can demonstrate to their staff they are being environmentally responsible, but “often they can’t spare the cash on the nicety of getting the certificate.”

Robin Mellon, Green Star executive director – advocacy and business services, said that costs vary significantly between a 4 Star or 6 Star rating. He also said the Green Building Council of Australia is looking at major streamling of the certification process to make it less onerous and much more accessible.