The expansion of energy rating mandatory disclosure to shopping centres has been shelved.

13 February 2014 — The federal government confirmed on Tuesday it has shelved plans to expand mandatory disclosure of energy ratings to retail property and other building types.

The move follows representation by the Shopping Centre Council of Australia to the federal government late last year.

The Commercial Building Disclosure program had been flagged for expansion to include shopping centres, hotels, schools and hospitals. According to the CBD website, “the Standing Committee on Energy (under the Ministerial Council on Energy) has agreed to expand the program to cover all other feasible commercial building types in 2014, subject to appropriate consideration and consultation”.

However, a CBD spokeswoman told The Fifth Estate this week there would be no changes or even consideration this year.

The spokeswoman said there had been no guarantee or commitment made to proceed with “phase 2” of the program, only to investigate the options for expansion. However, she said the CBD team were currently “not actively undertaking any investigations” for expansion as had previously been stated, and that any investigation was now off the table until at least 2015.

She said that while some preliminary work had been undertaken last year, this had now been put on hold, with the majority of the investigation yet to occur.

The setback comes as a report last week found that the Australian commercial property sector was underperforming on sustainability, with much of the blame levelled at the retail sector, particularly Westfield.

The Commercial Building Disclosure legislation requires owners of offices of more than 2000 square metres to disclose the property’s NABERS energy rating and lighting efficiency when they are offered for sale or lease, and has been credited with a wide-scale transformation of the energy consumption profile of the Australian office market.

Director of WT Sustainability Stephen Hennessy last year told The Fifth Estate that CBD was driving buildings to perform better and had raised the office sector’s average NABERS ratings since its introduction from 2.5 stars to over three.

With retail accounting for 4–5 per cent of total national carbon emissions, and shopping centres responsible for more than half of this, tackling shopping centre sustainability is considered a prime target for emissions reductions strategies.

Shopping Centre Council opposed to CBD

Angus Nardi, deputy director of the Shopping Centre Council of Australia, told The Fifth Estate his organisation did not support the CBD scheme for retail.

“We’ve raised our concerns recently with the Government,” he said.

Mr Nardi said his organisation had also sought to defer the expansion previously, in 2010 making a submission to the Prime Minister’s Task Group on Energy Efficiency, which recommended that mandatory disclosure for the retail sector be delayed until 2015.

The submission cited impediments including:

  • the landlord/tenant relationship being a highly regulated business-to-business relationship under State and Territory retail tenancy legislation
  • State and Territory shop trading hours legislation dictating (and limiting) the retail sector’s ability to trade when it wants

Mr Nardi told The Fifth Estate that while there were pockets of tenant demand for greater sustainability, members were “not experiencing widespread demand, particularly against fundamentals such as centre location/trade area, foot traffic, turnover, tenant mix and occupancy costs”.

An insights paper by AMP Capital, a Shopping Centre Council member, also stated there was no clear evidence that “customers will choose their shopping location based on the centre’s ‘green’ credentials”.

Mr Nardi, however, said reducing operating costs, particularly in relation to energy, water and waste, was still of concern to the sector, with NABERS and Green Star “important platforms and drivers for our members”.

For existing shopping centres a “well-documented split incentive” between landlords and tenants, and lack of access to capital were identified by Mr Nardi as the major barriers to improving sustainability performance.

Former NABERS chief Matthew Clark, now director of Common Capital, agreed that there were different drivers in relationships between landlords and tenants for commercial and retail property. He also added that the lack of “market maturity” of NABERS for shopping centres may partly explain the comparatively lower uptake of the tool.

This could explain some of the hesitance around mandatory disclosure. While the office sector had 10 years of using NABERS on a voluntary basis before CBD, with 50 per cent of buildings using it before the legislation came in, the NABERS for shopping centres tool is relatively new.

At a NABERS stakeholder advisory committee and national steering committee meeting last November, the national administrator said there was a workplace plan to increase the number of shopping centre ratings, which included engaging with peak bodies and working with assessors to promote the rating tool.

The meeting noted the “different structure of the shopping centre market as compared to the office building market” as a reason for the low number of shopping centre ratings, though stated that the relevant shopping centre market was also very small.

GPT sustainability manager Bruce Precious said it was unclear as to why there was resistance to mandatory disclosure.

“You could speculate that some are anti any form of regulations and will fight this,” he said. “They might argue there is a cost to bear, and if tenants start asking they may not be able to demonstrate a benefit and it just becomes a burden to business.”

He said the key to greater sustainability in the shopping centre industry was creating appropriate market drivers.

Retail industry waiting on ERF

Mr Nardi said that the proposed Emissions Reduction Fund could be utilised by the shopping centre sector to improve sustainability outcomes, and that the council was “actively engaged” with the government regarding this.

“If the ERF is designed properly, and responds to the sector’s real issues and barriers (rather than theoretical abatement models), it could be a step-change opportunity for retail property and even bring forward whole portfolio upgrades,” he told The Fifth Estate. “It’s worth aiming big.”

Mr Nardi said a key issue would be the ERF having a simple, appropriate methodology for shopping centres not captured by NABERS (those under 15,000 sq m, or 78 per cent of centres), and pointed to the Green Building Council of Australia’s newly developed Green Star Performance tool as a possible good fit.