Why is it so hard to get tenants to become more sustainable? We ask Investa’s Michael Cook, who attended our Mad Men for the Planet workshop in November, on his experience with encouraging greater sustainability from tenants.
Yep, great idea. Get tenants to up their game on sustainability and get their offices NABERS rated. After all the big corporates can often be in a 5 or 6 star NABERS base building, so why wouldn’t they want to riff of the glory and amplify their brand?
According to Michael Cook, group executive for Investa Property Group, the theory and the logic don’t always translate into reality.
If anyone knows about tenant engagement it’s Investa. Cook’s team was one of the first to jump strongly onto sustainability, energy efficiency and, yes, even tenant engagement.
Investa led the charge on green buildings and has trialled attempts at tenant engagement, through ideas such as the Building Run program with CitySwitch and other internal programs.
But roaring successes these have not been. You can understand why. Tenants are busy, – they’re there to work and get on with their business. And owners are reluctant to push tenants too far.
Truth be told, tenants are wary of landlord motives, to put it politely. After all our immense nine chapter ebook The Tenants and Landlords Guide to Happiness wasn’t an idea in search of a need. There is a big gaping hole in the way tenants and landlords relate to each other.
Cook says engaging with tenants on improving energy efficiency is something his team is always trying to do better.
“It’s just one of those ongoing perplexing puzzles that we deal with every day,” he says.
But why is it so hard?
Partly it’s that the major building owners, in some respects, have been a victim of their own success. Tenants don’t worry so much about sustainability anymore because the assumption is that they’ve “ticked that box”.
“If you’re in an Investa building or a GPT building or a Stockland building or Dexus, your assumption can be that you are in a very, very sustainable environment and you’re in one of the most sustainable buildings in the country – because you are.”
On the other hand, more and more tenants are recognising the feel-good factor of a well-performing building and saying, “Yeah sustainability is a no brainer; what do we have to do?”
“It’s happening, but getting them to the next level is the key to us advancing further up the scale,” he says. “We’re thinking about it, we’re working on it, we’re trying to engage but I think by and large most tenants are on board for that low hanging fruit.”
Another issue is that as an owner the company often has to deal with third parties.
“If you have to go through a third party representative, they are not necessarily interested in ideas and methodology that are going to benefit someone’s corporate sustainability objectives – they just don’t see it as critical,” he says.
“They are more interested in saving their client money than looking at ROIs or anything like that.”
Another problem is the landlord team is often dealing with representatives from HR or procurement who don’t have decision-making authority for big-ticket items.
“We might come up with an idea that might enhance that environment even further and it might be entirely to their benefit but there may be some cost involved.
“Now normally the people who handle this from the tenant’s side are not able to make those capital decisions and that is the frustrating thing.”
It’s a lot easier if the idea is at no cost and no disruption – the tenant will say “yes, just do it”.
According to Cook, it’s not that tenants don’t care; that would be too harsh a spin.
“I think they would care if they knew what they were caring about,” he says.
But yes, tenants could do more.
The lowest hanging fruit is lighting.
“That is probably the lowest of low hanging fruit and it has the greatest benefit to a tenant to get their lighting right,” Cook says.
Investa now adds $25 or $28 a square metre to a tenant’s incentive, but then carries out a lighting upgrade to LEDs. The tenant gets a payback in reduced energy costs.
With smaller, sub-1000 square metre tenancies, the tenant can be encouraged to select a more energy efficient fit-out.
“If we encourage them to fit it out in a different way, when that tenant leaves after five years, we can reuse that entire tenancy configuration. We’re trying to design out the redundancy factor from the beginning.”
Investa also calculates the lifecycle costing of all equipment in their buildings and can establish a NABERS impact on replacing that equipment. At 242 Exhibition Street Melbourne it established that replacing the lift had a greater NABERS impact and lower energy consumption than retaining the current one.
“One of the reasons Investa has dived on sustainability is there is a definite commercial advantage in doing so,” Cook says. “If a tenant in our portfolio is not embracing just the basic concepts of sustainability, it’s not their fault – it’s our fault because we haven’t enunciated what the benefits are well enough.”
Tenants always want a quick return and don’t always have the capital for investing in energy efficiency measures. Investa can put in the capital but then the tenant has to make the call to pay a higher rent to get the sustainable outcome.
Cook says a building doesn’t have to be six star to have an impact.
“I think the important thing is that the building is rated and the management team is maintaining a strong rating regardless of how old the building is.”
Investa transformed 130 Pitt Street Sydney from a half a star to five stars.
“I think that’s better than creating a building from scratch that’s already six stars and running it like a two star building,” he said.
The Mad Men NABERS competition now has a $10,000 prize attached in matched funding to turn a marketing/promotional concept for NABERS to reality.
The idea has been to create a marketing concept to circumvent the reluctance of many tenants – the corporates – to engage strongly in sustainability. By coming up with a strong marketing concept pitched to office staff, the hope is that they will see a strong rating in NABERS energy, water, waste and indoor environment as a great thing to expect in a building.