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How Aussie Post achieved a major asset value uplift with green thinking

Australia Post's Sydney HQ StarTrack House

According to consultants involved in the $45 million upgrade for the Australia Post headquarters at Strawberry Hills in inner Sydney, the building achieved a substantial value uplift primarily because of works that included substantial improved environmental outcomes.

So how do they back up these claims and what did the work involve?

Campbell Williams

Campbell Williams

According to project director Campbell Williams of Norman Disney and Young, sustainability was a core focus for the program of works, which encompassed a complete overhaul of electrical, mechanical, hydraulic and fire systems, as well as upgrades to glazing, the facade, lobby, interior fitouts and landscaping.

The building also now has the infrastructure in place for electric vehicle charging to be installed in the basement carpark, with the aim of introducing electric vehicles for parcel delivery by the end of the year if Australia Post’s current EV trial in Melbourne proves successful.

Market estimates of the building value before the upgrade was about $45 million pre-upgrade, but during the upgrade’s early stages in 2013, it sold for $168 million to AXA Real Estate and Eureka Funds Management.

According to Williams, the uplift in value was largely due to the five star NABERS and 5 Star Green Star Office ratings the building was on track to achieve.

The building is a “classic example of change of use” and what can be achieved in terms of a building’s lifecycle. It was originally a mail sorting centre which was converted to offices in 1989, he says.

“But by today’s standard the quality of the offices was not anywhere near where it needed to be,” he says.

“The upgrade has also improved the capital rate of the building. [Previously] it was lightly tenanted and wasn’t being used to its full capability. The ground floor, for example, was poorly organised. Now we have overcome those issues.”

The knock-on effect of bright shiny Barangaroo offices

He says new commercial developments such as at Barangaroo are drawing tenants out of lower grade offices in the CBD and also city-edge sites like Strawberry Hills, and that this is creating demand for upgrades.

“There are opportunities to upgrade, and this is having a knock-on effect to CBD property stock,” Williams says.

Ian Van Eerden

Ian Van Eerden

NDY sustainability consultant Ian Van Eerden, who worked on the project, says there are also firms with multiple sites that are looking to upgrade offices outside the CBD to match the standard of Barangaroo and other new developments, as otherwise there can be a sense that staff in lower grade offices are not on an equal footing.

“If you have an asset in Parramatta, you don’t want it ageing to B Grade,” he says.

Van Eerden says DEXUS is one of the property trusts implementing this type of portfolio-wide upgrade program, and was one of the exemplars used by Australia Post to benchmark its aims for Strawberry Hills.

Williams says the client had done a tenant market survey and established that tenants are looking for five star NABERS and 5 Star Green Star.

But there’s some things that can’t be changed

The major constraints the team had to work around related to the existing structure and materiality of the building.

Williams says the client decided to upgrade the double glazing of the facade, which was a major capital expense, as it would have a positive impact on thermal and energy performance. Other aspects of the building, however, imposed limits on what could be achieved.

For example, in terms of improving the energy efficiency of lighting, the ceiling grid would have needed full replacement to install LED lighting. Instead, a sophisticated Digital Addressable Lighting Interface system, daylight harvesting and upgraded T5 lighting were installed. A similar issue existed with the heating, ventilation and airconditioning system, with the lack of a raised floor negating the possibility of underfloor air distribution systems.

Working around the constraints

Instead, upgrades were carried to out to chillers, fans, and air handling units and the airconditioning system was re-configured to match the PCA Grade A zoning requirements.

In accordance with lease agreements, the standard hours of airconditioning services for each tenant have been programmed into the new building management system, with an interactive internet capable interface installed that enables tenants to request HVAC after hours. This interface also reports on each tenant’s after hours airconditioning usage.

The system also has a “Trim and Respond” zone polling methodology that adjusts temperature and airflow to zones only after there have been a certain level of requests for adjustments received though polling of set control points. Van Eerden says this system, while it means tenants need to make some adjustments in terms of dressing for the weather, has resulted in no more than “the usual level” of tenant complaints.

Aust-Post-solar-arrayTenant and FM engagement is key

The project involved working with tenants to explain how the building systems work and why they work the way they do to deliver energy efficiency. Williams says it created a greater level of acceptance and engagement.

Tenants have been given a log-in to the new energy monitoring system that was installed to provide metering, monitoring and reporting of all of the building services, including real-time NABERS rating estimates. Every lift lobby also features a display screen that shows in real-time how energy use, water use and other parameters are tracking in the building.

The facilities manager and the maintenance personnel, including the cleaners, were involved in the early planning discussions, in order to gain their input, expertise and engagement with the final range of initiatives and ensure maintenance and general functionality would be smooth.

Getting to five stars

The installation of a 1048-panel solar photovoltaic system brought the NABERS rating up to five stars, and the 371.5 MWh a year of electricity it generates is sufficient to reduce base building load by 25 per cent. The installation was connected to the base building mechanical switchboard.

Van Eerden says it has also generated increased rental returns and, overall, that the energy efficiency measures and solar between them will result in savings of over $340,000 a year in electricity bills [at current prices] and a reduction in energy usage by around 50 per cent of pre-upgrade consumption.

“Australia Post didn’t look at the payback of any of the capital spend for the project except for the renewable energy system and the energy efficiency measures. They did look at maintainability,” Van Eerden says.

He says the level of client engagement resulted in the project gaining Green Star innovation points, particularly for initiatives like future electric vehicle use that, combined with the onsite power generation, creates an almost zero carbon transport solution.

According to Van Eerden, Australia Post is “reshaping corporate policy around the building”.

Challenges outside the envelope

One element of the upgrade that revealed unexpected issues was the hydraulics component. All amenities were replaced with low-flow systems, which meant the entire building had to be replumbed as the falls on the existing pipes were insufficient for a low-flow to function properly.

However, it turned out the same was true of the pipework outside the building envelope that connects the building to the wider sewer system, and civil engineering works have been required to rectify the problems that resulted.

Green is the new black in property

According to Van Eerden in terms of both upgrades and new builds, the subcontractor and contractor sectors have all become more aware of how to build green. Green Star has also done a substantial amount to progress the agenda.

This extends to clients, who are beginning to see the business case for more sustainable buildings, including elements such as indoor environment quality through avoiding volatile organic compounds in fitout materials and furnishings.

“If you increase the budget for the building by 10 per cent, it leads to improved outputs from your workforce, so it pays for itself,” Van Eerden says.

Sustainable upgrades make sense both from an environmental point of view and from an investment point of view, he says.

“Because existing buildings are a huge part of the property sector, we have really got to make them sustainable [now]. If we wait, we’ll find suddenly there are 30 to 40 of them all suddenly need replacing as they’ve reached end of life.”

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