Green Property

Property is all about location, location, location right? Not necessarily say professional property managers, who are now ‘greening’ their buildings to improve returns.

Property managers at the big end of town have realised that by offering ‘greener’ buildings they can improve the wellbeing of tenants and also receive a better financial return.

What’s driving greener buildings?

Improved Tenant Wellbeing

‘Greener buildings both attract prospective tenants and help retain existing tenants, driving building values’ says Ernst & Young partner Richard Bowman.

By offering comfort factors such as increased natural light and fresh air, the property owners can improve the wellbeing of the tenants. Happy tenants means fewer complaints and less attrition. It also means that property owners can attract better quality tenants and charge them a premium. All of which favourably impacts the bottom line.

The tenants will also experience a boost in staff productivity and a reduction in absenteeism, as occupant health and comfort improves.

‘What’s clear in our portfolio is the greener the building, the stickier the tenants,’ concludes Tony Cope, head of office at GPT.

Rising Energy and Water Costs

Rising electricity costs and increasing

water bills are more and more commonplace. Indeed further energy price increases are inevitable. By improving the sustainability features of your property you can reduce your operational and maintenance costs immediately. Ignoring these rising costs simply means that the ‘cost’ of not going green will continue to grow.

Staying Profitable

The property market is rapidly changing. By acting proactively and enhancing the sustainable features of your property, you can help ensure its financial viability into the future.

‘Sustainable refurbishment produces a return of better than 10% on investment’ according to research by Langdon Davis, Global Construction Consultants.

A study, on sustainable refurbishment titled Existing Buildings Survival Strategies: Making It Happen, gives property owners a guide to assessing building assets, setting appropriate targets and identifying key upgrade initiatives to make sure they are making sound investment decisions. The study shows that sustainable refurbishment of commercial property will increase the property’s value and cash flow. Additionally, the study concludes that refurbishment will soon be essential to maintaining occupancy rates and avoiding obsolescence.

Government Legislation

Commercial buildings, mainly old buildings, account for ten per cent of Australia’s total annual greenhouse gas emissions. From later this year, mandatory disclosure of energy ratings and performance may be required for commercial offices > 2000m², sold or leased. Mandatory disclosure will be required if the Building Energy Efficiency Disclosure Bill is passed.

‘Mandatory disclosure is likely to lead to a period of investment arbitrage where informed market participants take advantage of their superior knowledge to create a competitive position for themselves,’ says Adam Murchie director of Melbourne-based property investment group Forza Capital, and vice president of the Australian Direct Property Investment Association.

Tenants Go Green

Tenants are increasingly demanding buildings that are energy efficient. Large (mainly listed) companies and Government tenants are seeking to ‘reduce their greenhouse footprint’ and also their energy costs. Savvy businesses also realise that happy staff are more productive.

‘Keeping in mind that the greatest cost to business is that of salaries, any improvement in productivity, through occupant comfort, lighting, temperature and increased natural ventilation, etc will have a major impact on the bottom line,’ Davis Langdon, Global Construction Consultants.

What can you do?

Obtain a Green Star certification

If you would like to register your building for Green Star certification, the Green Building Council of Australia (GBCA) recommends that you appoint a Green Star Accredited Professional (GSAP). The GBCA recommends that you ask your consultant:

• Are you a registered Green Star Accredited Professional, assessor, or independent chair?
• How many Green Star projects have you worked on?
• Have you undertaken any Green Star courses?
• Is your company a member of the GBCA?

Review your Listed Property Stocks

If you have an investment in listed property securities you would be wise to review your holdings. Assuming mandatory disclosure becomes legislated some property trusts will be well ahead of the pack, and others lagging.  

Mandatory disclosure is likely to lead to a period of investment arbitrage where informed market participants take advantage of their superior knowledge to create a competitive position for themselves,’ Adam Murchie director of

Leading Australian Building Owners

Top-5 Listed Property Companies

MAASTRICHT UNIVERSITY, ‘Environmental Performance: A Global Perspective on Commercial Real Estate’

Top-5 Private Property Funds

MAASTRICHT UNIVERSITY, ‘Environmental Performance: A Global Perspective on Commercial Real Estate'

Melbourne-based property investment group Forza Capital, and vice president of the Australian Direct Property Investment Association.

A studyix in January 2010 by Masstricht University’s European Centre for Corporate Engagement has rated the Australian property fund managers and companies in its Environmental Real Estate Index.

Make Green Property Work for You

Like most things in life, change is inevitable. The same can be said of the property sector. It is changing rapidly.

Those companies and individuals who act proactively to adapt their share holdings and buildings to the changing tastes of tenants, rising energy costs and impending legislation will be ahead of the pack, and financially rewarded.

Karen McLeod is an Authorised Representative (No. 242000) of Ethical Investment Advisers (AFSL 276544). We provide investment advice for ethically-minded and socially-conscious investors who are seeking competitive returns.