The retail sector consumes 50 per cent of the commercial property sector’s share of energy. Now shopping centres, at least, will try to do something about that environmental profile.

by Lynne Blundell

FAVOURITES: 24 October 2010 – When it comes to energy efficiency the retail   sector is the very large elephant in the room. With an amorphous mass of disparate operators and shopping centre owners, the sector is a massive consumer of energy and water and has defied a uniform approach to more sustainable practices. But this could be about to change with a  NABERS retail energy ratings tool to be introduced nationally next month.

The creation of the ratings tool is not before time. With its high use of refrigeration, airconditioning and water, retail accounts for around half of the total commercial property sector’s energy consumption.

Even this figure is only a rough estimate because no comprehensive breakdown of commercial sector energy use in Australia has been done  – it could easily be higher.

A recent report on the energy use of Canada’s commercial and institutional sectors gives an insight. It revealed the retail sector is the second highest consumer of energy, accounting for 14 per cent of total energy consumption. Only education was higher at 22 per cent, while offices accounted for 13 per cent.

In terms of energy intensity, or energy used per square metre of floorspace, the sector was one of the most energy intensive, only slightly behind food services and hospitals.

Paul Bannister: “In offices it is about tenants demanding change, but in retail this current move to more sustainable buildings is more about companies’ corporate social responsibility.”

According to Paul Bannister, managing director of energy consultancy Exergy which has helped build the new NABERS tool, the retail sector is a voracious user of both energy and water, accounting for around 50 per cent of the commercial property sector’s energy use and four to five per cent of Australia’s total greenhouse gas emissions.

But because of its multi-faceted nature and complex tenant/landlord boundaries it has fallen through the cracks of energy efficiency policies.

“It is a very complex sector with widely varying arrangements between tenants and landlords – there is no consistency. Some landlords provide airconditioning to half of the shopping centre, while others only provide it to common use areas,” Dr Bannister says.

“And traditionally, building owners have thrown all the responsibility for energy use onto the tenant so there has been little incentive for them to focus on efficiency in their centres.”

Unlike the office sector where tenant pressure has resulted in a huge growth in sustainable building fitouts, retailers have not wielded the same power. Here, landlords have had the upper hand and energy and water consumption has not been a high priority.

So will things change with the NABERS rating tool? Dr Bannister believes it will, largely because the process of collecting data to create benchmarks required considerable co-operation from shopping centre owners. During the two-year process, attitudes changed and large centre owners such as Westfield, AMP, Stockland and Mirvac warmed to the idea of sustainable shopping centres.

Not really surprising given the changing social attitudes to climate change and energy consumption and the possible backlash from consumers and shareholders.

“In offices it is about tenants demanding change, but in retail this current move to more sustainable buildings is more about companies’ corporate social responsibility. A key driver is the need to attract investment and to keep shareholders happy,” said Dr Bannister.

But here’s the rub – the NABERS retail rating tool will only apply to shopping centres of 15,000 square metres and above. Below that size, diversity is too great to apply uniform benchmarks, says Dr Bannister.

And with shopping centres accounting for only 28 per cent of the total retail market, according to the Shopping Centre Council of Australia, that leaves an awful lot of retail space unaccounted for.

Another gap is tenant accountability – the NABERS tool is broken down into energy and water consumption of the base centre but does not look at individual retail outlets. The tool will be voluntary but, given the federal government’s commitment to energy efficient buildings and the introduction of mandatory energy consumption reporting for the office sector, this could well change further down the track.

Need to include tenants

Robin Mellon – the Green Building Council is looking to introduce a custom rating tool that would cover shopping centre tenants

On the building design side the Green Building Council of Australia has had a retail Green Star rating for the past two years, Retail Centre v1, which also applies only to the base centre.

Robin Mellon, the GBCA’s Green Star Executive Director agrees that ratings need to apply to tenants as well as the base building. He said the GBCA is looking at introducing a custom tool in the future that could provide a solution to this sort of gap.

“We want to follow up with a tool for retail interiors as there needs to be a way of capturing tenant behaviour. That is the way we want to be heading so we are looking at developing a custom tool that mirrors the way the BREEAM tool works in the UK,” Mr Mellon said.

The BREEAM environmental assessment system, which is widely used internationally, has a specific ratings tool that applies to buildings that don’t fall under its other specific categories.

Mr Mellon said the GBCA was also considering adapting the retail ratings tool to take into account climatic zones, something that Green Star currently does not do but NABERS does.

A key problem area for shopping centres in achieving sustainable operation is air conditioning, says Mr Mellon.

“The size and scale of shopping centres can make them difficult to condition – with the need to provide fresh air, natural light and temperature control to large spaces often requiring a combination of solutions.”

Mr Mellon concedes that the retail sector is “a very complex animal” but believes the many challenges of the sector also provide opportunities.

“The aspects that make shopping centres less sustainable are also the things that provide opportunities to make a positive difference. The very large areas of roof space can be used to gather rain and to generate power through solar power. The fact that they have centralised power can also be put to use through co-generation plants, particularly if there are other businesses nearby that can share the generated power.

Shopping centres also have big potential for good

“We can start to look at these buildings as power stations and water producers so that they have a positive effect, rather than just thinking about how to reduce the negative impact,” said Mr Mellon.

Shopping centre owners were starting to see the logic of reducing their impact because there was increasing evidence of the financial returns of doing so, said Mr Mellon.

“The data is there in the US and it shows that shopping centres that have greater amounts of fresh air, more outdoor spaces and fewer air pollutants in materials such as formaldehyde have lower energy bills and higher sales per square metre. People enjoy going there.”

One shopping centre owner who has focused on addressing the air conditioning issue is Mirvac. At its Orion Springfield Shopping Centre in south east Queensland, the first retail centre in Australia to receive a six star Green Star rating, Mirvac has dramatically cut energy and water use.

Orion Springfield – designed to use half the energy use of a similar sized shopping centre

According to Adrian Michaels, Mirvac Asset Management’s sustainability manager, the shopping centre was designed to use approximately half the energy of a similar-sized shopping centre and reduce potable water use by over 60 per cent. It did so through installing a trigeneration system, rainwater capture and water recycling and variable volume air conditioning.

Unlike traditional shopping centres, Orion provides airconditioning to all of its tenants.

“Orion Springfield was the first Australian project to incorporate variable air volume air handling systems in all its retail tenancies,” Mr Michaels said.  “Orion’s energy use in the air conditioning of tenancies will save 67 per cent of the energy from the reduced fan usage and 33 per cent from reduced cooling requirements.”

Show me the numbers say centre owners
But not everybody is convinced that there is as yet substantial evidence of the financial benefits for shopping centres owners of investing in sustainable technology and design.

Michael Baker, independent consultant to the retail sector, told The Fifth Estate that shopping centre owners and retailers globally were very late adopters of sustainability because they had been unconvinced of the financial returns.

“To date there has been very little investment in sustainability in the retail sector because there’s been no hard data to show return on investment. Property owners haven’t been prepared to make the enormous upfront investment – they want clear evidence of the value,” said Mr Baker.

Caroline Noller: “No new tenant comes into one of our centres without signing a green lease. As at June, 580 tenants were on green leases – that is 16 per cent of all our leases. As the churn happens with tenants this number will increase and within five years we hope all tenants will be on green leases.”

Caroline Noller, GPT’s corporate social responsibility manager, agrees. The complexities of the retail sector have made it extraordinarily difficult to apply uniform benchmarks for energy use and environmental impact.

In addition large property groups such as GPT have an obligation to shareholders to be prudent when spending millions on new technologies such as co-generation plants and renewable energy technologies.

GPT has ownership interests in 17 shopping centres across Australia. The group is using a pilot project at Charlestown Square shopping centre in Newcastle to monitor the financial returns on large scale investment in sustainable technology for the retail sector.

“It is not an insignificant amount that is being invested in the project. When you get to this sort of scale it is even more important to verify that the investment delivers on the financial predictions. Once we can see the results and we can prove what the returns are it will have a transformational effect,” Ms Noller said.

Retail property owners, and the property sector as a whole, said Ms Noller, also need to be cautious about trying to be energy generators.

“It is a very important watershed for the property industry to understand how renewable energy and sustainable technology apply to us. Energy generation rules and regulations are designed for very large scale operation and we have had to jump through all sorts of hoops to incorporate co-generation in the Charlestown Square project.”

Other sustainability features at Charlestown include a blackwater treatment plant and solar thermal technology, which involves a partnership with CSIRO to investigate the application of the technology.

Tenants the weak link, but a green lease helps
But while shopping centre owners can make all sorts of commitments on the base building, tenant behaviour could undo progress.

GPT focuses on tenant and community advocacy to increase awareness and change behaviour regarding environmental impact. But the key to ensuring tenants reduce their energy and water use is a green lease, says Ms Noller.

“No new tenant comes into one of our centres without signing a green lease. As at June, 580 tenants were on green leases – that is 16 per cent of all our leases. As the churn happens with tenants this number will increase and within five years we hope all tenants will be on green leases.”

Those tenants already on green leases have shown an average improvement of 29 to 32 per cent on their carbon footprint, said Ms Noller. One example of a GPT green lease requirement is that restaurants using woks in their food preparation must use waterless woks. This seemingly simple measure has resulted in a large reduction in water use, in one tenancy by a massive 75 per cent.

Where she wants to see major improvements is in the way tenants use materials. Currently there is a massive waste of materials with high turnover of refits and very little focus on recycling, says Ms Noller.

“It is an area that is completely neglected. The emphasis is on a short time line with very few materials designed for re-use and the impact on the environment is enormous. It really is a blank space that needs to be addressed.”

Westfield bows to climate change risk

Pictured: Westfield’s Sydney City…a “failure to comply with relevant legislation would have serious repercussions”

TFE asked Westfield what its position was on sustainability in its retail centres and were referred to its response to the Carbon Disclosure Project.

Westfield’s approach is one of risk management – it says it is compelled to take climate change and sustainability seriously both because of regulatory pressure and to maintain its leadership position. Westfield says in its response:

“Westfield recognises that the failure to comply with relevant legislation would have serious repercussions for the Group. In addition to any financial penalties (for example, under the National Greenhouse and Energy Reporting Act 2007 penalties of up to $220,000 can be applied and in some cases criminal penalties), the Group’s reputation as an industry leader worldwide would be diminished.”

A key project for Westfield in Australia is the Sydney City development, due to open in stages from late 2010 onwards. In the retail component of the project Westfield is aiming for a 25 per cent reduction in energy consumption compared to the national average and a 5 Star rating in both Green Star and NABERS energy ratings.

The project will feature a number of energy efficient measures including trigeneration and absorption chillers and a hybrid chilled beam/low temperature variable air volume air conditioning system.

According to Westfield climate change risk is here to stay and with it the necessity to incorporate green design principles and energy reduction plans into its retail centres. Failure to do so, it says, brings other risks including reduced market share, negative investor sentiment, reduced employee retention rate, higher energy and water costs and litigation and insurance risks.

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