The City of Melbourne's Council House 2 (CH2) 6 Star Green Star, Image: Dianne Snape

In 2006 less than one per cent of Sydney and Melbourne’s CBD commercial floorspace was certified green. Twelve years later we’re sitting at 46 per cent for Sydney and 28.8 per cent for Melbourne.

The figures, revealed in CBRE and Maastricht University’s first International Green Building Adoption Index (IGBAI), put the two Australian cities at third and fourth in the world for green-certified floor space, behind Canadian cities Vancouver (at 51.6 per cent) and Toronto (at 51 per cent).

For Sydney and Melbourne, a Green Star Office or Performance rating, or a NABERS whole or base building rating (minimum five stars) was used as a metric.

The report found that the percentage of Green Star and high NABERS ratings were about equal in the Sydney market, with 25.97 per cent of offices having five or higher star NABERS ratings and 25.82 per cent having Green Star ratings. Combined, 46.45 per cent of floorspace had one or both of the ratings.

In Melbourne, 14.61 per cent of floor space had high NABERS ratings, while 18.03 per cent was Green Star-certified. Combined 28.84 per cent of floorspace had one or both ratings.

Financial performance is part of the reason the market has exploded. Last year the Australian Green Property Index showed that the total three-year annualised return for 6 Star Green Star office buildings was 15.6 per cent compared to a 12.8 per cent for the rest of the market.

The graphs in the report show there are different points where the rating tools took off. For NABERS it was 2010, which aligns with when the Commercial Building Disclosure program made NABERS ratings mandatory.

For Green Star an inflection point occurred in 2013. According to Green Building Council of Australia head of public affairs Jonathan Cartledge some of the uptick can be attributed to the introduction of Green Star Performance, launched in 2013, and a portfolio approach to Green Star Performance, introduced in 2015.

Through this portfolio approach, he said, an “enormous volume” of certified floorspace had been added.

“The portfolio approach shows as increasing appetite for investors to have increased transparency in terms of ESG,” Mr Cartledge said.

“Charter Hall is a great example.”

The other part of the story, he said, was increasing focus on sustainability by owners and investors, as well as increased tenant demand.

“A lot of those trends are being seen internationally.”

CBRE Pacific head of sustainability Emma McMahon said the Australian real estate market was recognised as a leader in green building.

“Australia has topped the GRESB leaderboard for the past seven years in a row,” she said.

“Green building certification tools such as Green Star and NABERS are now hygiene factors in this mature market and largely an expectation of tenant customers leasing office space, reflected in the outperformance figures within the research report.”

Interestingly, from the data presented there doesn’t appear to be great overlap of Green Star and NABERS ratings. For example, in Sydney floorspace for either rating is about 25 per cent of total space, but floorspace for both combined is 46 per cent, making it appear the ratings are almost mutually exclusive.

The report – from CBRE’s global team – said the findings showed “relatively limited overlap between the two programs”, though Mr Cartledge said the local industry knew there was “considerable overlap between the two ratings, even if the report isn’t communicating that.”

Ms McMahon told The Fifth Estate a potential explanation could be due to existing buildings that have not had Green Star ratings or high NABERS ratings undergoing upgrades that bring their NABERS ratings up.

“We’ve have experience with a few clients – because they’ve needed to upgrade their buildings because a chiller has failed or a piece of plant has reached end of life – they’ve designed with a 4.5 star rating in mind, but through management techniques we’ve been able to lift that to 5 star or 5.5 star NABERS.”

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