26 May 2010 – The Shopping Centre Council of Australia says  that sustainability drivers for shopping centres “do not exist”, and that there are huge barriers to energy efficiency investment  that warrant government funding and changes to the law to recover capital investment in these areas

The claims, made in a  submission to the Prime Minister’s the Task Group on Energy Efficiency recommend that mandatory disclosure for the retail sector be delayed until 2015.

The statement was made as part of the SCCA’s comments on the Task Group’s latest Energy Efficiency Issues Paper, delivered via email on 5 May. The submission emphasised “the unique characteristics of the retail property sector, in comparison with other commercial property asset classes.”

There were unique impediments to energy efficiency measures in retail property compared with other aspects of the commercial property sector, the SCCA said , including that:

• The landlord/tenant relationship is a highly regulated business-to-business relationship under State and Territory retail tenancy legislation
• State and Territory shop trading hours legislation dictates (and limits) the retail sector’s ability to trade when it wants.

Among the most salient comments raised were those relating to the lack of sustainability drivers for shopping centres, with the SCCA stating:

“The sustainability drivers for other commercial property asset classes – particularly office buildings (such as office tenant demand and government accommodation policies) – don’t exist for shopping centres. There is no real demand from tenants – particularly small retail tenants – for sustainable premises. The overwhelming drivers for tenants continue to be occupancy costs, operating expenses and customer traffic. While this arguably highlights a case for energy efficiency; this remains problematic given the barriers and challenges noted in this submission.”

The SCCA also raised concerns that the NABERS Retail rating tool, launched in  December last year only applied to around 23 per cent of shopping centres nationwide:

“The retail market is thus not as mature as the office market in relation to NABERS ratings and “rating-driven” demand and energy efficiency investment (NABERS has applied to the office market for over ten years). Given that NABERS Retail applies to centres with a gross lettable area retail (GLAR) of 15,000 square metres or greater, we estimate it applies to around 340 centres (23 per cent of total centres) and over 12.3 million square metres of GLAR (68 per cent of total GLAR).”

Comments also focused on mandatory disclosure, with the SCCA asking for delays to 2015 to the planned introduction of mandatory disclosure for retail.

“Given the challenges in developing the [mandatory disclosure] scheme for the office sector (which commences in October 2010), in addition to retail sector specific issues, we believe the government has set too short a time-frame for the scheme to extend to shopping centres. This problem is compounded given that the principal tool for the scheme, NABERS Retail, was only launched late last year, and it will be another year until the first ratings are being completed. We believe the proposed scheme should be deferred until at least 2015.”

The SCCA also has an eye for the funding assistance handed to commercial property owners, such as the Green Building Fund. While the fund had provided $60 million  across over 150 projects, the retail sector was  ineligible for any funds under the  scheme.

• “Access to capital is another ‘known barrier’ to energy efficiency investment. We urge the Task Group to recommend that any extension to the Green Building Fund, or any new fund, should enable shopping centres to participate (as opposed to limiting such funds to the office sector).

• “Such funds would complement the roll out and uptake of NABERS Retail, and leverage projects that the industry is willing to invest in (and the increased capacity, innovation and learning that comes with it).”

The SCCA is currently seeking eligibility under the recently established Australian Carbon Trust, specifically the $50 million Energy Efficiency Trust, to help unlock energy efficiency investment. In another claim, the retail tenancy legislation expressly limited  recovery of capital expenditure, such as construction, plant and equipment, from retail tenants, the SCCA said in its submission.

• “These provisions include, for instance, section 23 of the NSW Rental Leases Act 1994 and section 41 of the Victorian Retail Leases Act 2003.

• “Such provisions constitute what the Task Group has described as “known barriers” – as both a “split incentive” and a “regulatory barrier”. These provisions constrain capital expenditure on energy efficiency devices and continue to present a major barrier to unlocking energy efficiency investment.

• “We urge the Task Group to recommend that investigations be undertaken to enable capital expenditure for energy efficiency investment to be exempt from such regulation.”