The City of Sydney is looking to bring in new planning controls that will mandate higher energy efficiency standards for offices, shopping centres and hotels, which will increase to net zero emissions from energy use from 2026.

The planning proposal and draft development control plan (DCP) will be considered for approval by the Central Sydney Planning Committee on Thursday, with a vote by council next Monday.

The proposal has been in development over the past four years with no serious objections, other than some concerns from the Property Council of Australia (PCA) and Investa about how the codes will apply to existing buildings.

In their submissions to the council, leading developers Stockland, Frasers Property Australia, Lendlease, Crown Group, Dexus and Mirvac all expressed support for the plan.

For offices and shopping centres, the new performance standards measure base building operational energy use (which does not include energy use by tenants), and whole building energy use for hotels.

The inclusion of shopping centres in the code is a big step forward for the Sydney City Council. 

In the past, shopping centre operators have strongly resisted their sector being included in mandatory energy performance guidelines, such as the nationwide NABERS Commercial Building Disclosure (CBD) program.

The CBD program ­requires information on a building’s energy performance to be disclosed when larger commercial premises are sold or leased.

How it will work and what it covers

The standards will be implemented in two stages, giving developers time to plan ahead and innovate as they transition their buildings to net zero.

The performance standards for stage one, which come into force from 1 January 2023, can be achieved through energy efficient building designs, as well as through on-site renewable energy generation. 

Developers will be able to demonstrate their buildings meet these standards by securing a NABERS Energy rating, a specific energy use criteria level in Green Star, or by using a particular amount of energy per square metre of floor space each year.

In phase two, which comes into force from January 2026, developers will also need to offset the emissions from any remaining energy use through the purchase of renewable power. Some of the energy efficiency targets will also increase.

The rules will apply to all new buildings over a particular size, measured by their net lettable area for office space (NLA), gross lettable area for retail (GLAR), or number of rooms for hotels.

For existing buildings that meet those thresholds, they kick in when additions or alterations add 50 per cent or more to their NLA, GLAR, or hotel room count. Hotels with 100 or more rooms will also be included if they are refurbished.

The thresholds are:

  • offices with a net lettable area (NLA) of 1000 square metres or more
  • shopping centres with a gross lettable area for retail (GLAR) of 5000 square metres or more
  • hotels of 100 rooms or more
  • mixed use buildings, where one or more of the above thresholds for each proposed use apply

The proposal doesn’t apply to residential buildings, because NSW planning laws do not allow local councils to require a higher standard than the state’s Building Sustainability Index (BASIX) standard.

What about existing buildings?

The PCA and Investa raised concerns in their submission about the ability for existing office buildings to meet the same stage one energy efficiency standards as those being required of new developments. 

Most industry experts agree that retrofitting existing buildings to be more energy efficient can be more costly and expensive than constructing new, energy efficient buildings. 

In Sydney’s CBD, there are a range of existing commercial buildings across a range of different ages and asset classes. 

The PCA pointed out that requiring older, non-heritage office buildings to meet the same stage high efficiency standards could encourage them to be demolished. 

It could also drive large scale upgrades of lower grade office buildings, bringing them from lower B and C grade to A grade and higher. 

In both cases, this would lead to less affordable office space in the Sydney CBD and contribute to additional carbon emissions from unnecessary demolitions. 

To account for these issues, there is a separate pathway for existing buildings with poor energy efficiency, which requires them to show a 2 Star improvement to their NABERS Energy rating, as well as the electrification of any gas appliances. 

For buildings that already have adequate energy efficiency performance, both electrification and procurement of 100 per cent renewable energy are needed, along with an increase up to a NABERS Energy 5 Star.

Major commercial property developers back the plan

The performance standards were developed through extensive consultation over the past four years. 

In 2018, the council held two forums with industry and government to identify the issues and opportunities in pursuing net zero through planning, which informed the scope and focus of the project.

As a result, the proposal has received strong endorsement from a number of leading property developers and owners, including Stockland, Frasers Property Australia, Lendlease, Crown Group, Dexus and Mirvac.

Stockland group executive and chief executive for commercial property, Louise Mason, said her company supports the council’s performance standards because it aligns with its own commitment to net zero carbon emissions across its business. 

“The performance standards are critical improvements in energy performance to transition to net zero energy buildings,” Ms Mason said.

“Setting step changes in performance standards for energy efficiency and integrating renewables provides industries the time they need to adapt and innovate to achieve net zero.”

Frasers Property Australia chief executive Anthony Boyd said the consultation on the new planning standards created an opportunity for everyone to contribute their specialist expertise and experience from different perspectives.

“Sharing this knowledge has resulted in a sensible, flexible, staged implementation of new planning standards ensuring the industry continues to be challenged to deliver meaningful, impactful outcomes, for buildings in Sydney’s CBD to reach the shared goal of net zero energy in the quickest possible time,” Mr Boyd said.

“The new performance standards will meaningfully raise the bar for new commercial, retail and hospitality developments, through a mix of energy efficiency and renewable energy requirements, enabling the transition to net zero energy buildings in a staged and practical manner.”

Lendlease’s Australian property chief executive officer Kylie Rampa said her firm is encouraged by, and very supportive of, the City of Sydney’s performance standards and the reductions in carbon emissions expected to result from their implementation.

“Lendlease commends the City of Sydney for its leading position against climate change through implementation of the performance standards. Reducing carbon emissions from the built environment is essential to reduce the future impacts of climate change,” Ms Rampa said.

“The City of Sydney performance standards align with Lendlease’s targets of net zero carbon by 2025 (scope one and two) and absolute zero carbon by 2040 (scope one to three), and respond to the NSW government’s net zero emissions target, and the Greater Sydney Region Plan’s ‘low carbon city’ objective. 

“The performance standards and the staged implementation provides industry with certainty to plan for net zero energy development.”

Meanwhile, in his submission to the council, Dexus chief executive Darren Steinberg was also full of praise for the plan.

“As the largest owner and manager of commercial buildings in Sydney, we believe it is important to ensure these controls can be implemented in an effective and practical manner across multiple asset classes and development of different scales.

“The proposed method of introducing performance standards to govern development is a crucial policy tool for the City of Sydney to provide clear direction and certainty to the property industry in the transition to net zero. The proposed pathway allows sufficient time for industry to adapt and investigate new design innovations in this area that will be critical to future building design.”

How Sydney compares to other cities

The Fifth Estate also reached out to the city councils of other mainland state capitals to find out how their policies compare to the new Sydney DCP.

An Adelaide City Council spokesperson said it does not have a similar policy to what the City of Sydney is proposing, because of differences in that state’s planning laws.

“The planning system is different here in South Australia, being state-wide based, so something like this would need to be pushed at a higher state-wide level.”

A spokesperson for the City of Parramatta told the Fifth Estate sustainable development is a key priority for the council, which is committed to reducing emissions and managing energy, water and waste efficiently to create better buildings and precincts across the Local Government Area.

“As part of our Local Strategic Planning Statement City Plan 2036, council is continually reviewing its sustainability targets in the city’s planning framework. Council has a target of net zero emissions by 2050, and has established interim goals.”

The spokesperson said Parramatta recently endorsed community emissions targets of 50 per cent by 2030 and 70 per cent by 2038, under its 2022 Community Strategic Plan:

“New planning controls for the Parramatta CBD already include best practice energy and water consumption/use targets and electric vehicle charging infrastructure. Plans for new developments also need to include mitigations for urban heat and solar reflectivity.”

Meanwhile, a spokesperson from the City of Perth told The Fifth Estate it will investigate incentives to deliver environmentally sustainable development as part of its draft local planning strategy.

On 28 June, the council approved a “sustainable city” notice of motion that requests the Chief Executive Officer to prepare a report outlining:

  1. current barriers and disincentives to the incorporation of sustainability measures in both new developments and existing buildings in the city; and
  2. recommendations on initiatives and incentives to stimulate and accelerate incorporation of sustainability measures in new developments and existing buildings in the city, which could be implemented by the city and others in the 2023/24 financial year.

The council will also “engage with relevant industry bodies, state and federal government agencies, and representatives from the design and construction industry to seek their views and feedback” to inform the council’s recommendations.

Meanwhile, a spokesperson from the City of Melbourne told The Fifth Estate they will be in touch down the track when it has news to share regarding its plans for net zero requirements.

EDIT 18 August: Added comments from the City of Perth and the City of Parramatta.

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