Breaking with convention in construction systems can be financially rewarding for developers. In wall assemblies, for instance, research by Currie & Brown Australia and Sweett Group UK on behalf of Kingspan Insulation found that using an advanced slimline insulation product in new non-residential buildings could deliver a return on investment (ROI) of up to 856 per cent due to net lettable area (NLA) gains, compared with conventional solutions using glass wool fibre batts.

The Real Value of Space in Commercial Real Estate study quantified the net lettable area gains and relative capital expenditure costs of concrete wall assemblies using two products, Kooltherm K12 Framing Board and Kooltherm K17 insulated plasterboard, in comparison with the thickness and costs of conventional steel stud-and-track wall systems using 90 mm glasswool fibre batts.

Kooltherm K12 Framing Board

In more than 70 per cent of cases, the K12 system would deliver a positive ROI, and in all cases the K17 delivers a positive ROI due to reducing the cost per lineal metre of the wall assembly.

Another advantage noted in the analysis is both products deliver a higher R value than a conventional stud-and-track assembly with glasswool batts. This has implications for the future value of assets, as policy increasingly targets the performance of buildings in terms of energy use and carbon emissions, the report said.

Founder and director of Development Finance Partners Baxter Gamble says the amount of NLA within a commercial property is “absolutely crucial” in terms of value and returns for owners, and speed of construction and savings on build costs also have benefits for developers.

The performance of a building also matters, with thermal performance a major factor in terms of outgoings, Gamble says.

“Where you can make cost savings, and increase the floor space ratio while also getting a decrease in outgoings such as for heating and cooling, the net rent the landlord receives will be better,” he says.

That also translates to higher capital values for the building.

Gamble says this is important in Sydney’s competitive market where vacancy rates have been compressed due to the removal of some of the B and C grade stock for conversion to apartments.

While big companies in Australian CBDs want to be aligned with a green branded building, smaller companies looking for smaller floorplates will make their decisions based on the price per square metre and the outgoings, he says.

“Many of these businesses are being pushed out of the CBD.

“In the Sydney CBD office rents for B and C grade buildings are on the rise.”

Gamble says this is due to a reduced supply of commercial space as more buildings become converted into apartments.

Conversion of city buildings to apartments has benefits for developers and local and state government because they don’t tend to involve increased infrastructure costs.

The format of the apartments however is influenced by the ageing demographic, who are not so interested in an 85 sq m two bedder, but want 115-120 sq m of space, including two main bedrooms and a third bedroom for visiting grandchildren, Gamble says.

Gaining floorspace relative to the external walls makes sense for developers targeting this market. This is particularly crucial in larger apartments, where the number of internal walls already shrinks the floor area.

Christou Design Group specified the Kooltherm K17 insulated plasterboard for a six level, 42-apartment project on Bennett Street in Perth. The project was constructed from precast concrete wall panels, with the K17 used as the combined insulation and interior plasterboard.

Senior technician for the studio Dean Heslop said the result was a much reduced overall wall thickness that added an average of half a square metre to the floor area of the one bedroom apartments, and even more to the two bedroom apartments.

Over a cross section, using the K17 could save 50mm in wall thickness, he says.

Because the apartments were quite small, any additional space within the apartments was crucial to gain back extra room.

Another advantage of the product was reduced build time. Because the product integrates the rigid insulation and plasterboard at the point of manufacture, only one trade is needed for installation, instead of several.

“There is only one trade, and one application,” Heslop says. The installers only have to complete the taping and jointing between panels.

Also, the risk of defects is reduced compared to traditional batt-type insulation wall assemblies.

“If it is applied in accordance with the manufacturer’s recommendations, because you are only using one trade, less can go wrong,” Heslop says.

Economically, it is also the “best way to go,” he says. The product might be more expensive on a sq m basis than some options, but increasing the speed of construction reduced the developer’s holding costs.

On the other hand, though material costs are more expensive, the fully installed costs are generally competitive, if not cheaper, than conventional options.

The product also resulted in a thermal performance higher than the R2.5 minimum required for the project, he says, achieving R2.6 without additional insulation.

Project director at Savills Australia Chris Sutherland says increasing NLA is what landlords are looking for.

Commercial property landlords consider costs over time, he says. For example, if they sign someone for a 10-year lease, the landlord looks to the rental value in terms of returns over that lease period.

In residential developments, increased space is an opportunity in terms of liveability, he says.

Reduced build times can have benefits also. For an owner-occupier of a commercial property, shorter timeframes means opening the doors to customers sooner.

For developers, reducing the number of trades, improving buildability and reducing timeframes can mean savings not only on the actual construction, but also on financing.

Every extra week of construction means paying extra interest on the loan, Sutherland says.

“For example, in the case of the $29 million office development in the Real Value of Space report case studies, reducing construction time by a fortnight could mean savings in excess of $100,000 through reduced contractor site preliminaries and developer interest payments.”

Improved thermal performance also has a market value. Sutherland says that if a project can exceed Section J requirements, there is some ability for the developer to prove to potential tenants that energy costs will be lower.

Sutherland says NABERS ratings are starting to become a factor for tenants in terms of decision-making. Thermal performance is one of the fundamental elements in terms of energy use for heating and cooling.

If there is a saving on energy over the life of a lease, Sutherland says it is more likely to be attractive.

For developers aiming to on-sell commercial buildings, attracting premium branded tenants helps improve the selling price, he says, as investors are looking for stable brands holding leases within buildings.

Space and the NABERS rating are both important in attracting good branded tenants, Sutherland says.

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