Green-rated office buildings in Sydney and Melbourne enjoy an 18 per cent premium on sales prices depending on their NABERS rating, a new report by real estate services firm Knight Frank has found.
Office buildings in Australia’s two largest cities with a NABERS Energy rating of up to 4.5 stars benefited from an eight per cent premium on sales price compared to unrated buildings, while those with higher ratings of 5, 5.5 or 6 stars saw a massive 18 per cent increase.
The report took into account other price influencing factors such as location, building height and grade, to determine the specific impact that NABERS ratings have on the market.
It also found that price premiums for higher rated buildings in London were only 10 per cent, putting Australia ahead of the global “green premium” trend.
“The increasing importance of ESG considerations within real estate is widely acknowledged, but it is less well understood that sustainability credentials are already having a significant impact on building values,” chief economist at Knight Frank Australia, Ben Burston said.
“The finding clearly demonstrates that ESG considerations are a very real consideration for investors today.”
Mr Burston added the importance of energy efficiency and its impact on building values was expected to increase as more tenants and investors adopted specific environmental targets, placing greater pressure on under-performing assets.
“Tenants are increasingly gravitating toward stock that offers a high degree of energy efficiency and this is impacting rental performance and allowances for downtime in buildings with vacant space,” he said.
“At the same, investors are taking a forward-looking approach when assessing building value and view strong sustainability credentials as key to minimising risk.”
Meanwhile, new modelling has shown that those paying a premium for green buildings were in fact getting what they paid for in terms of building performance.
The report by the Green Building Council of Australia (GBCA), titled Closing the performance gap in Australia’s commercial office sector, showed the modelled energy performance of Green Star certified buildings was being achieved in operation, as demonstrated by NABERS Energy ratings.
It found 88 per cent of offices analysed achieved their modelled NABERS Energy rating to within 0.5 stars, while 75 per cent of Green Star-rated buildings achieved their modelled NABERS rating when operating at Peak Performance.
“For two decades, the perceived performance gap between ambition and actuality has led owners and occupants to ask: Are we getting what we’ve paid for? This report provides a clear and emphatic ‘yes’,” GBCA chief executive Davina Rooney said.
The average NABERS Energy star rating has increased over the past decade, rising from 4.5 stars in 2012 to 5 stars in 2019, which NABERS director Carlos Flores attributes to government and industry leadership.
“This report’s results demonstrate what is possible when government and industry embrace innovation in building operations and shows that the outlay is worth the outcome when it comes to decarbonising the built environment,” he said.