Office blocks with solid green credentials can be worth up to 10 per cent more than other office buildings, new research shows.

 

The Building Better Returns report, commissioned by the Australian Property Institute and the Property Funds Association of Australia, found that top energy ratings delivered a 9 per cent green "premium" in value overall.

 

In Canberra, the rating attracted a 21 per cent premium compared with a 4 per cent premium in the Sydney CBD and 8per cent in suburban Sydney, the report found.

Green office buildings in Sydney and Canberra were benchmarked against non-green office buildings, taking into account values, rents, occupancy, outgoings, incentives and yields.

 

The research was undertaken by the University of Western Sydney (UWS) and the University of Maastricht, Netherlands, with Jones Lang LaSalle and CBRE.

 

Key findings in this report include:

 

  • A green premium in value for office buildings was evident for the NABERS energy rating. This saw the 5 star NABERS energy rating delivering a 9% green premium in value and the 3-4.5 star NABERS energy ratings delivering a 2-3% green premium in value.

  • A clear link between enhanced green premiums in value with the higher rated NABERS energy rating categories.

  • Green premiums in value differed in specific office markets, being most evident in the Sydney suburban office market (8% green premium) and the Canberra office market (21% green premium) in the 5 star NABERS energy rating category. This compares with the lesser impact in the Sydney CBD office market (4% green premium).

  • Evidence of major discounts in value in the lower NABERS energy rating categories (less than 3 stars) for the Sydney CBD (10% discount in value) and Canberra (13% discount in value).

  • In the 5 star NABERS energy rating, the Canberra office market showed the largest green premium in value (21%), as well as the largest discount in value (13%) in the lowest NABERS energy ratings.

  • The Green Star rating showed a green premium in value of 12%.


  • Lesser impact was seen in the green premiums in rents for the NABERS energy ratings, with a 5% green premium in rents evident for the Green Star rating.

  • Major discounts in rents were evident in the lower NABERS energy ratings for the Sydney CBD (9% discount in rents) and Canberra (6% discount in rents).


  • In the 5 star NABERS energy rating, the Sydney CBD office market showed the largest green premium in rents (3%), as well as the largest discount in rents (9%) in the lowest NABERS energy rating.


  • Green premiums were also evident in reduced vacancy, reduced outgoings, reduced incentives and reduced yields, particularly at the higher rated NABERS energy categories.

  • These office market green premiums in values and rents for Green Star and the top 5 star NABERS energy rating are generally comparable to that seen in recent US green office building studies (eg: Eichholtz et al, 2010b).

 

"A key finding was evidence of major discounts in value in the lower ... energy rated office buildings," UWS Associate Professor John MacFarlane said.

 

"This clearly highlights the financial and environmental importance of the higher NABERS and Green Star ratings."

 

The findings corroborate international evidence on the relation between the environmental performance and the financial performance of commercial buildings, he said.

 

Click here to download Building Better Returns Research Report