A major study of three different types of buildings has shown that sustainable refurbishment produces a return of better than 10 per cent on investment.
The study, recently completed by Arup and Davis Langdon for the Property Council of Australia, adds weight to the push by the property industry for the federal government to do more to encourage refurbishment and retro-greening of existing buildings.
Arup and Davis Langdon analysed three generic building types – a 20,000 sqm CBD tower, a 15,000 sqm city-fringe highrise and a 2,800 sqm suburban office, all built in the 1980s.
The analysis documented the significant return on investment from sustainable refurbishment, and suggested that the impact on the property market of the federal government’s Carbon Pollution Reduction Scheme (CPRS) would make this return even more attractive.
The results provide clear evidence that upgrading an established existing building to achieve a minimum 4.5 star National Australian Built Environment Rating System (NABERS) rating would provide a positive return on investment while ensuring that the asset remains competitive with contemporary buildings.
The study, published as Existing Buildings Survival Strategies: making it happen, was launched at the Property Council's Existing Buildings Solutions Summit, held in Sydney in June 2009. It guides building owners through a step-by-step process for assessing building assets, setting appropriate targets and identifying key upgrade initiatives to make sure they are making sound investment decisions.
The results suggest that sustainable refurbishment of commercial property not only provides increased asset value and cashflow, but will soon be essential for maintaining occupancy rates and avoiding obsolescence.
Property Council chief executive Peter Verwer says: “There is a growing demand by building tenants for sustainability.”
“To attract and maintain long-term tenants, building owners need to provide office space with excellent environmental credentials.”
“The Existing Buildings Survival Strategies publication will help property owners and managers comply with the Federal Government's new energy efficiency framework.”
“It offers a practical guide to upgrading Australia's 60 million square metres of existing office space, most of which is more than 25 years old.”
Pippa Connolly, a principal in Arup’s sustainable buildings team, says some leading Australian companies were already heading in this direction.
“They’ve looked at the economy, assessed their current building portfolios and are now moving quickly to upgrade and maintain a competitive long-term position in the market,” she says.
“The study also supports the argument that existing building refurbishment makes economic as well as financial and environmental sense.”
Mark Beattie, managing director for Davis Langdon in Australia, predicts that refurbishment of existing buildings could help lead economic recovery.
“It would create an economic boost by stimulating market activity and providing new jobs,” Beattie says.
“The federal government should consider introducing financial incentives such as tax breaks and accelerated depreciation, to ensure that retro-greening has an immediate impact on the marketplace.”
Colliers International performed a detailed valuation of the CBD tower case to show how different levels of upgrade would change its market value. The results supported Arup and Davis Langdon’s finding that an increase in market value in excess of 10 percent was achievable.
Darren Whitelegg, managing director of real estate management for Colliers International, says the return on investment for greening existing buildings was unquestionable.
“Even more importantly, the owner ends up with a regenerated asset that attracts higher rents, lower vacancies and reduced utility outgoings,” he says.
“Colliers’ tenant survey showed that sustainability is a major priority in the market and we expect that it will become even more important in the future.”
The Existing Buildings Survival Strategies II: making it happen publication is available from the Property Council's bookshop. It is priced at $160.00 for Property Council members, and $260.00 for non-members.
