Event
Date
by Romilly Madew Green Building Council of Australia.
Presented at the Manning Clark House Forum, Making Canberra Sustainable, Canberra, 17-18 October 2005
Short Biography
Romilly Madew is a Consultant to the Green Building Council of Australia, joining the organisation in early 2005 and a board member of the ACT Land Development Agency.
Romilly was previously the ACT Division Executive Director and National Executive Director - Sustainability for the Property Council of Australia, having been in this role since 2002.
Romilly became fervent about green buildings through her work at the Property Council,
- Establishing the inaugural Sustainability Committee for the ACT Division,
- Working closely with the ACT Government's Office of Sustainability creating the green building working group,
- Speaking regularly and written numerous articles on the importance of the commercial property industry becoming greener and
- Being involved with numerous forums and site visits on how to become green.
At the Green Building Council, Romilly is working on Green Star diffusion project, an Ausindustry supported program to accelerate the adoption and use of Green Star, writing a publication called "Building the business case for green buildings" and acting as the GBCA's government advocate with the Federal and ACT government,.
Romilly also works part time as the Manager-Commercial Activities for her family winery, Madew Wines, located near the empty Lake George, in NSW.
Introduction
There has been an immense change in the property industry following the Sydney Olympics - a phenomenon known as green office buildings.
The change has come about due to a number of drivers including government regulation and policy, tenant drivers including productivity gains, stakeholder demands, environmental imperatives, cost efficiencies, future proofing and brand value.
In Canberra the office market is expected to experience immense change in the coming five years, with over 200,000 sqm of new and refurbished office stock coming online, and the lease expiry of a number of Federal government tenancies, this may result in a high vacancy rate of ageing stock.
Industry and government need to work together to develop flexible solutions aimed at greening the built form.
Recommendations for Making Canberra Sustainable include the importance of Government Leadership; Incorporating the ACT industry and government formed "green building working group" under Sustainable Environment Reference Group (SERG); ensuring ESD becomes a priority and a guiding principle in the planning process; awarding fiscal and planning incentives for the construction and refurbishment of commercial buildings and supporting the adoption of a national, integrated suite of rating tools 'Green Star'.
The issues
Building and construction output
Buildings consume one third of the world's resources; they use 42% of Australia's energy; 12% of our water demand is consumed by buildings; up to 40% of waste going to landfill is from construction and deconstruction activities (predominantly the churn of refurbishments); and 40% of Australia's air emissions are from buildings.
Australians spend 90% of their time indoors and statistics are emerging that our buildings air quality is likely to be 5 times more polluted than the outside air.
The latest Hanscomb report on International Construction Intelligencei ranks Australia 14th out of 15 in total construction spending in their per capita comparative statistics. However, what is frightening is that Australia is then ranked third in primary energy consumption and second in greenhouse gas emissions.
Canberra office market
The Canberra office market makes up nearly 1.6million sqm of office stock.ii Of this stock - nearly 33% is the lowest grade of C & D grade. These grades include buildings generally greater than 25 years old with inferior floorplates and low quality plant equipment. In most cases these buildings would be considered environmentally caustic.
To add to the problem is the large amount of new and refurbished commercial office stock coming online over the coming years. This includes over 200,000 sqm of new space in Civic, Tuggeranong and Woden and the 25,000 sqm refurbishment of Anzac Park East and West.
Experience in the Australian marketplace suggests that office buildings will require major refurbishment at least every 25 years to remain competitive. When a building loses tenants and finds it difficult to attract new tenants, resulting in prolonged periods of vacancy in excess of competing properties.iii So for those owners of the ageing C and D grade buildings their options are limited - they either have to refurbish or consider converting the building to other uses.
Green solutions need to be incorporated into all these refurbishments and conversions. As tenants increasingly use sustainability as a criteria for location selection, those property owners who overhaul these older buildings using Environmental Sustainable Development ("ESD") principles will be rewarded with cost reductions such as lower energy costs, waste disposal and water costs, lower environmental and emission costs and lower operations and maintenance costs.
In Canberra there have been a number of examples of successful refurbishments and conversions, including the Jolimont Centre, The Waldorf and Tasman House - all three adapting to different uses from office to hotels and student accommodation. The most impressive refurbishments environmentally include the John Gorton Building (which houses of the Federal Department of Environment and Heritage) and new Department of Immigration buildings in Belconnen which replaced the aging Benjamin Office buildings.
Industry barriers
Within the property industry there are inherent barriers that often act to ensure that efficiency measures are not adopted, despite the fact that a strong business case can be made for their implementation.
Most significantly, these barriers relate to the developer/builder/owner and owner/tenant divisions, or split incentives, that often result in the benefits of efficiency or improved performance measures not accruing to the party that initiated them.
A building's life spans its planning, its design, construction and operation; and its ultimate re-use or demolition. Often the entity responsible for design, construction, and initial financing of a building is different from those operating the building, meeting its operational expenses and paying employee salaries.
Decisions made at the first phase of building design and construction can significantly affect the costs and efficiencies of later phases.
Property is a long-term asset class and yet it is financed using the short-term bias of the current financing methodology - as if it is a five to seven year asset rather than a 40 year plus asset. This short-term bias has had an immense impact on the character and quality of our built environment as well as on the environment. The Australian development and construction industry responds to this market demand of short-term returns in the only way it can: by reducing the cost and time of design and construction.
A building's life spans its planning, its design, construction and operation; and its ultimate re-use or demolition. Often the entity responsible for design, construction, and initial financing of a building is different from those operating the building, meeting its operational expenses and paying employee salaries.
Decisions made at the first phase of building design and construction can significantly affect the costs and efficiencies of later phases.
Current Practice
Utility costs are generally a small portion of property and construction industry input or operational costs so it is important to promote a range of benefits for all the sectors of the industry, recognising the players and split incentives of the industry.
The property and construction industry represents building owners, investors, financiers, managers, developers, builders, valuers, insurers, suppliers, miscellaneous service providers and institutions and, most importantly, occupiers. In effect, the property industry's value chain links every other sector.
Because of higher capital costs and hurdle rates, future financial benefits are discounted more heavily by private entities than by public ones, potentially further reducing the perceived value of future green building financial benefits for the private sector. These differences explain the disparity between public and private sector adoption of green building design.
International studies are demonstrating that new green buildings do not have a cost impost and countries around the world are putting in place fiscal incentives to assist existing buildings improve their environmental attributes and impacts.
What are green buildings?
For many people, the term "Green Buildings" brings images of natural materials, green roofs, radical passive design, and technological gizmo'siv
The Canadian report said "Even those with a more realistic understanding perceive green buildings as new and different. These perceptions do not necessarily appeal to other building stakeholders, especially key decision makers, so it is important to clearly understand what a green building is and what they look like prior to presenting a business case." v
The Green Building Council of Australia ("Council") states that a Green Building incorporates design, construction and operational practices that significantly reduce or eliminate the negative impact of buildings on the environment and occupants with strategies for addressing:
- energy efficiency
- greenhouse gas emission abatement
- water conservation
- waste avoidance, reuse and recycling
- pollution prevention - noise, water, air, soil & light
- enhanced biodiversity
- reduced natural resource consumption
- productive and healthier environments
- useable buildings
- social amenity
The Organisation of Economic Co-operation and Development OECD define green buildings as those buildings that have minimum adverse impacts on the built and natural environment, in terms of the buildings themselves, their immediate surroundings and the broader regional and global setting.
A green building is designed to minimise the total environmental impact of its materials, construction, operation and deconstruction while maximising opportunities for indoor environmental quality and performance.
Green buildings are constructed and operated in ways that enhance their impact on the environment and on the building occupants.
Green or sustainable buildings use key resources like energy, water, materials, and land much more efficiently than buildings that are simply built to code. They also create healthier work, learning, and living environments, with more natural light and cleaner air, and contribute to improved employee and student health, comfort, and productivity.
Sustainable buildings are cost-effective, saving taxpayer dollars by reducing operations and maintenance costs, as well as by reducing utility demand = lower bills and infrastructure costs.
Benefits of building green include elements easy to quantify - such as savings in energy and water usage, as well as those that are less easily quantified, such as improved indoor environmental quality.
The drivers of green buildings
Organisations are increasingly implementing environmentally sustainable practices as a result of demand from the market - consumers, investors, shareholders, employees, the community and government.
An article "Coming up to scratch" vistates that the factors of risk, economics and corporate governance are major drivers for property owners to make their existing portfolio greener.
In order to change the industry, understanding what drives the property industry is crucial.
Government influences
"What is missing is coordinated and concerted action. This committee believes that there is a need for the Australian Government to assume a leadership role." vii
Dr Mal Washer, Sustainable Cities report August 2005
Government (Federal, State and local) are a major influencers of the ESD agenda, especially in Canberra, through the vast amount of space it both occupies and owns, its regulations, policy and programs, and through its leadership.
The following list clearly illustrates the policies and projects of both the Federal and ACT government that will greatly influence the property industry in the ACT.
Federal
o Minimum standards for commercial buildings set by the Building Code of Australia ("BCA")
o Sustainable Cities report - August 2005 following the 2004 Inquiry into Sustainable Cities (House of Representatives Environment Committee)
o Green leases project (AGO);
o ESD Design Guidelines for Government Buildings (Dept of Environment & Heritage June 2005);
o Indoor Air Quality project (DEH);
o Your Building project (DEH);
o National Framework for Energy Efficiency (DISR);
o Energy White Paper "Securing Australia's Energy Future;
ACT
o Sustainability Legislation (due out later this year);
o Measuring Our Progress: Canberra's Journey to Sustainability, which looks at how well the ACT is progressing towards sustainability - July 2004;
o ACTPLA is developing a new code for commercial buildings and new design quidelines;
o No Waste Strategy;
o Water resources Strategy; and
o Tree Protection strategy.
In NSW by July 2006 all new government buildings will have to achieve a 4.5 star ABGR rating (Australian Building Greenhouse Rating System) and all existing buildings will achieve a 3 star rating where cost effective, further all government tenancies are to achieve four stars and 4.5 stars for fitouts and refurbishments - a focus on energy efficiency only
Building owners who do not understand the influence of government and future proof their buildings will be forced to undertake expensive retrofitting if they want government tenants.
Tenant Demand
Attracting tenants in the first place, especially those that are discerning and socially responsible is an important motivation for some owners. There is tenant pressure coming from large corporate and government tenants that are demanding green.
Considering people spend up to 90% of their time indoor and buildings are about the people who work and live in them. The interiors of our buildings clearly have an enormous impact on our comfort, health and productivity.
It is generally accepted that toxic substances in the workplace can increase sick days and sap energy levels.viii Further, the effect of space allocations, open plans, lighting changes, noise reduction and such has been generally assessed only according to anecdotal evidence - from employees.
It could seem that relying on staff assessments seems a little naïve. However the evidence is compelling, unhealthy indoor air quality is costing Australia business about $12 billion per annum in lost productivity (FASTS 2002). The City of Melbourne's new headquarters, Council House Two (CH2), claims it will achieve a 4.9% productivity increase which equates to $1.12m/annum savings in productivity and lower absenteeism.
However the Green Building Council believe the real benefit to owners is tenant attraction and retention. The benefits of a green building flow to the occupants of the building
As a result the owner stands to gain financial benefit for pre-committed new leasing and longer tenant leases and higher retention rates.
Investor Drivers
There is recognition that investors are looking for medium and long-term secure investments and as such the property sector will see this benefit. A property owner can position its building or its trust to attract this new investment and can promote the long term benefits
Building Quality Matrix
The Property Council of Australia's Building Quality Matrix, which rates the grade of a building, is currently being redrafted; the new draft stipulating that for buildings to achieve a Premium grading they must achieve a Green Star rating.
Making Canberra sustainable - recommendations
The property industry is well placed as a conduit for delivering significant long term environmental improvements using a broad range of measures. And it is unique in that it can directly influence and create behavioral changes at all stages of the supply chain.
It is therefore important that the industry is supported by government by ensuring that the construction and refurbishment of ALL buildings are green and to create incentives and remove barriers to sustainable development.
Following area a number of recommendations that could support the industry in Making Canberra Sustainable.
1. Government Leadership
Government leadership is crucial if the industry is to continue to develop the green agenda. The Department of Defence, the NSW Architect and Victorian Building Commissioner, have in their own right been instrumental in furthering the sustainability debate in Australia.
The ACT Government has also shown leadership through the Chief Minister, Jon Stanhope, announcing in late 2004 the commitment that Canberra would be an Australian centre for sustainable and innovative design and to introduce the Green Star Methodology for all new commercial and multi-storey residential buildings (when the tools become available). In addition, both the ACT Office of Sustainability and Land Development Agency are members of the Council.
2. Incorporate the ACT industry and government formed "green building working group" under Sustainable Environment Reference Group (SERG) with the aims of education and sharing of information in the property industry
3. Ensure ESD becomes a priority and a guiding principle in the planning process
Governments, while promoting green design, can also stifle it through codes and guidelines. An often cited problem is obtaining approval for green initiatives only to be discouraged due to contradictory policies.
It is important to seek the right balance between incorporating ESD principles in the planning process that stimulates green development and not over regulating to stifle good outcomes. Both the Federal and ACT government are well placed to work closely with industry to create this balance.
4. Award fiscal and planning incentives for the construction and refurbishment of commercial buildings
Building green often means having to apply new technologies and innovative solutions specific to a new development or building upgrade. Given the costs incurred as a result of delays and experimentation, government could support industry through fiscal and planning incentives for achieving agreed performance targets and for green research and development.
Planning concessions are powerful incentives for encouraging refurbishment of existing buildings to address performance (e.g. water and energy efficiency).
A detailed study is required of possible incentives (planning & fiscal) for the property sector that recognises the split incentives of the industry.
The ACT Government could provide incentives to industry by:
- reducing stamp duty conveyancing on sustainable buildings and increasing stamp duty conveyancing on least sustainable buildings. These concessions would encourage building owners to build/renovate or purchase property that meet certain green building requirements.
- wavering the change of use charge for the green conversion of buildings
- floor space ration and or other planning bonuses for the achievement of a standard green star performance for new and refurbished buildings.
- Demand a detailed study by Treasury of fiscal incentives for the property industry to facilitate green building initiatives for existing buildings.
Examples of fiscal incentives include:
* Special Tax Deductions which are available to the Film and Primary Production Industry and Mining Industry should be extended to the Property Industry.
* Increase the accelerated expenditure of R&D expenditure from 125% to 250% - the effect being to provide further incentive for the property industry to undertake R&D activities.
* Extend the definition of R&D activities and simplify the application process - this will provide more companies with access to R&D concessions.
* Introduce Tax Credits for green building initiatives to developers/owners. These Tax concessions would provide more incentive to upgrade existing assets sooner rather than when the major refurbishment cycle allows.
* Concessions could be made to reduce the amount of Capital Gains Tax payable on the sale of properties that meet certain requirements. For example, upon the sale of the investment property, certain qualifying expenditure could be included in the asset's cost base at say 125% of cost. The net result is that the amount that is subject to CGT is reduced. This would provide further incentives for investors to purchase green property.
A number of tax initiatives have been implemented or are being considered by other Governments in OECD countries. Following are examples from other countries where the respective Governments have attempted to encourage the uptake of environmental investments through the implementation of tax policies.
5. Support the adoption of a single integrated suite of rating tools = Green Star
In response to the need for a National approach a number of industry and government agencies conceived the idea of a not-for-profit organisation to provide an integrative framework and a national environmental rating system for buildings. The end result was the formation of the Green Building Council of Australia launched at the end of 2002.
The Council developed the only comprehensive voluntary environmental rating scheme for buildings in Australia based on international schemes we called it Green Star. Green Star rating tools are voluntary and recognise Best Practice and beyond
Green Star was created to:
- Establish a common language and standard of measurement for green buildings;
- Promote integrated design;
- Identify building life-cycle impacts;
- Raise awareness of green building benefits;
- Recognise environmental leadership; and
- Reduce the environmental impact of development.
The priority for 2003 and 2004 was to develop Green Star rating tools for the different phases of commercial Class 5 office developments - design, construction, tenancy fitout and ownership of office buildings.
The Council is currently finalising the development of the Green Star - Asset tool which rates the physical attributes of an existing asset and is independent of occupant behaviour or building management. The market wants to convince stakeholders that the existing Asset should be considered for space. It is also important for the management of that asset to tell owners or tenants that they are operating the building as efficiently as they can and the Council is working with the Facility Managers Association on a Management Reporting metrics that compliment the soon to be released Green Star - Office Asset rating tool.
Conclusion
The office market in Canberra is at a cross roads - with a large number of new and refurbished stock coming on line. In addition, too often you hear the excuse - it is too hard or expensive to build green. For those in the industry who have chosen to ignore these misconceptions they have reaped the benefits - consider the now fully leased 8 Brindabella Circuit at Brindabella Business Park, The first building in Australia to achieve a 5 star 'Australian Excellence' Green Star-Office Design rating. The building is a recycled concrete and steel structure facing north, clad in a variety of materials including glass and alucabord.
Canberra is in a unique position - the ACT Government own the land, so they can dictate how the land is developed. They therefore have a beautiful opportunity to demonstrate leadership and create a city like no other. There would be very few capital cities in the world that still have vast tracts of undeveloped land.
No longer can there be an excuse that it is cost prohibitive to be green, the business case has been proven time and again.
The time is right for government to continue to work with industry and the commonwealth to develop a range of solutions to ensuring Canberra is sustainable.
Endnotes
i Hanscomb Means report, "Rating Sustainability - How Green is your building" Volume 17, No 4 July/August 2005
ii Australian Office Market report, Property Council of Australia, July 2005 "Canberra market"
iii "Keeping up the standard" Property Australia - May 2005 pages 40-41
iv Yates (Alan) "Quantifying the Business Benefits of Sustainable Building (Draft for discussion)", Centre of Sustainable Construction, BRE, UK, February 2001
v Lucuik (Mark), A Business Case for Green Buildings in Canada, March 2005, page 3
vi Property Australia Dec04/Jan05
vii Dr Mal Washer, Chair, Foreward, Sustainable Cities report August 2005
viii Property Australia "interiors feature" August 2004