AUSTRALIA’S valuers have confirmed the hype: going ”green” definitely increases the value of an office building.

In fact, the buildings that are worth the most are those that have the best energy rating, the Australian Property Institute found in a report that it said was the first rigorous assessment of green office buildings in Australia. Buildings with low energy ratings lost value.

The study, which focused on Sydney and Canberra, said office buildings with a 5 star NABERS energy rating created a premium of 9 per cent, while 3-4.5 star rating gave a 2-3 per cent premium in value. The Green Star rating showed a green premium in value of 12 per cent.

NABERS (National Australian Built Environment Rating System) measures energy and water use in existing buildings, while Green Star evaluates the environmental design and construction of buildings.

The API was the lead group for the study, which was headed by Richard Bowman, senior API committee member and a partner in real estate services with Ernst & Young. He headed a panel of experts – mainly valuers in each state – that represented big estate agents and valuations firms.

Jennifer Cunich, executive director of the Victorian division of the Property Council of Australia, said that year on year, its data indicated that green buildings were preferred over lower performing buildings.

“There are many factors that are driving green building demand such as tenants, lower operating costs, higher yields, healthier workplaces, rating tools (NABERS and Green Star), corporate social responsibility and enhanced productivity,” she said.

“Significantly, many CEOs are leading this green building race as they seek to differentiate themselves from their competitors.”

Other key findings of the API report were:

• Lower NABERS ratings (fewer than 3 stars) showed a major discount in value in the Sydney CBD (10 per cent discount) and Canberra (13 per cent).

• In NABERS 5 star, Canberra had the largest green premium (21 per cent), and the biggest discount (13 per cent) in the lowest NABERS energy ratings.
• In rents, the Green Star rating had a 5 per cent green premium.
• Big discounts in rents in the lower NABERS ratings for the Sydney CBD (9 per cent) and Canberra (6 per cent).
• In 5 star NABERS, Sydney CBD had the largest green premium (3 per cent).
• Green premiums were also evident in reduced vacancy, reduced outgoings, reduced incentives and smaller yields, particularly in the higher NABERS categories.

The study found green premiums in value differed in specific office markets. For 5 star NABERS, it was most evident in suburban Sydney (8 per cent green premium), Canberra (21 per cent). The impact in the Sydney CBD was less – 4 per cent.

It also found these premiums in values and rents were generally comparable to those in recent US studies.

The study evaluated 206 NABERS-rated office buildings and 160 non-NABERS buildings in Sydney and Canberra. Of these, Sydney CBD accounted for 90, Sydney suburban 91 and Canberra 25. They included premium, A, B and C grade, and 97 per cent were greater than 2000 square metres.

For Green Star, the analysis used 23 4-6 Green Star buildings for the ”office design” and ”office as built” categories, but was limited by the amount of rental information available.

The study was prompted by concern about the impact of the property industry. It said buildings contributed up to 23 per cent of carbon dioxide emissions, 40 per cent of energy requirements, 16 per cent of water usage, 30 per cent of solid landfill waste, 40 per cent of raw materials and 71 per cent of electricity consumption.

Source: The Age