Sustainability takes a battering as Perth deals with vacancy crisis
Willow Aliento | 8 March 2018
acCommercial office vacancy rates of 20 per cent have hammered the appetite for sustainability among Perth’s landlords and tenants, according to property industry insiders.
The only real traction is happening around solar PV and the “bling” aspects of wellbeing amenities, according to Colliers’ Perth sustainability manager Patrick Jeannerat.
Tenants simply don’t ask for the range of sustainability offerings Colliers has, he says.
“It’s an uphill battle. It’s all push from our end – no pull.”
The soft market for commercial space means everyone is focusing on price. Sustainability is “not material” for the majority of clients.
In the B, C and D grade sectors the lack of interest is particularly acute. Jeannerat says that when leases end in these buildings, most tenants are migrating to Premium and A Grade space. Some of the B,C and D grade stock may never be leased again.
Overall, Jeannerat says tenants are more inclined to respond to shortcomings in a building, such as feeling uncomfortable due to HVAC issues.
Most tenants and landlords aren’t looking to go beyond compliance in terms of how space performs.
Though it’s hot property on the east coast, there’s not much interest in health and wellbeing in WA either. Ratings such as WELL, NABERS IEQ and Green Star Performance are not on the priority list.
“There is very little traction [on these] across the board in Perth,” Jeannerat says.
Cycling bucking the trend
One aspect of wellness and sustainability where there is some movement is end-of-trip facilities for cyclists.
“They are very important here.”
They tend to go into a building when new tenants are being recruited or a major new tenant has been signed on, or as part of a major refresh and refurbishment.
It is “all about the bling” of people having fresh towels waiting for them, and the material items and amenity associated with new and fresh facilities.
Harder for energy efficiency
Less visible aspects like energy efficiency, however, are having a tougher time.
Jeannerat says that while people are aware of NABERS ratings and energy efficiency, and the cost of energy, the fact a higher rating means a relatively small reduction in the proportional cost of base building energy use means it may not be considered material.
Some landlords also require a firm approach in terms of meeting their obligations under the Commercial Building Disclosure legislation.
“There is minimum compliance.”
And while tenants may pay less for energy use, they may end up paying more for services that go along with a high-performance building, such as a high-performing facilities manager.
Where a landlord looks at upgrading a building’s performance, the cost of consultants and service agreements with HVAC engineers and others may make the proposition look like a “zero sum” in terms of bottom-line benefits.
Jeannerat says it all comes down to the downturn in the state’s economy with the end of the mining boom.
“The trend is cutting costs wherever we can, especially in terms of consultants.”
One area where there is interest in terms of energy savings is procurement. This can be a quick win for the landlord, Jeannerat says, but has no sustainability outcome.
On the upside, Perth and other areas of WA are in the middle of a solar boom.
Jeannerat says he has just completed a study on the uptake of solar in property, and the industrial sector is well and truly embracing PV.
There is also a growing uptake in retail, and significant traction with mid-rise commercial property owners where the building has significant roof area that is not over-shadowed.
One of the factors fuelling momentum is a recent change in legislation that allows landlords to up-sell the energy PV generates to tenants at gazetted prices. Jeannerat says Queensland is the only other state where this situation now exists.
Landlords can also up-sell energy from behind the meter they have purchased at bulk prices to tenants at gazetted rates.
Many building owners are seeing the business case for becoming not only a reseller, but a generator as well.
A solar system on the roof will generate power for around 25 years, Jeannerat says, and achieve payback, if the energy is on-sold, within 2-3 years.
This has led more owners including retail centres to look at installing systems of 100 kilowatts and above, even as large as 200kW or more. This is the equivalent of becoming a power station, and can generate many hundreds of thousands in added revenue.
“There is a window of opportunity now,” Jeannerat says.
Power Ledger takes off
Another trend that is taking off is Power Ledger, founded by sustainability star Jemma Green.
“There could be a perfect storm coming,” Jeannerat says.
He says the combination of extensive PV uptake, peer-to-peer trading, electric vehicles and batteries could see a dramatic shift in the whole WA energy landscape.
Green Star, but only if it’s easy
Commercial project manager ACORPP director Gordon Bateup told The Fifth Estate clients were not asking for sustainability.
“There is an interest, but as a general rule it is driven by the designer.”
They will endorse a plan to achieve the equivalent of 4 Star or 5 Star Green Star rating, but generally only if “it is easy”.
The appetite simply isn’t as prominent or driven as it has been in the past.
Generally, clients now want the green outcome only if it doesn’t cost much more, if there is a demonstrable payback and if they plan on being in the space for a considerable length of time.
High vacancy rates cause uncertainty
Bateup says high vacancy rates are part of the reason, as they create uncertainty in the market.
“Generally sustainability picks up when there is more certainty,” he says.
“When the market is soft everyone is dollar focused, they don’t want to spend extra dollars of capital.”
Bateup says developers talk about sustainability, but are not usually interested in implementing it unless they are a big organisation with a long-term interest in the property, for example a CBUS or an ISPT.
The major focus is on “wowness” with base buildings that will attract tenants. It is rare to find a building at the top end without cyclist facilities, which is the flip side of the soft market and having fewer tenants to choose from.
The focus is on a “ramp up of the tenant experience”.
Like Jeannerat, he is seeing solar as a bright spot, with regional properties and metro retail in particular showing major uptake.
He says ACORPP has one client currently installing PV as part of the whole fitout project.
Batteries are not yet a major line item, but those taking up PV are often building in flexibility to enable future uptake.
There are some ways in which gains are being achieved due to changes in the building fitout supply chain.
Wellness embedded in design
For many projects, some aspects of sustainability have become embedded, rather than appearing as line items.
Perth designers are adept with wellness aspects such as natural light and encouraging movement, he says.
“The focus on the sustainability of people is very strong and is very well-embedded in design.”
In specifying carpets, paints and other elements, it is also now “almost impossible” to pick anything other than a low-VOC product, Bateup says.
Those manufacturers have shifted enormously over the past 10 to 15 years. Many other products have also moved towards lower-toxin offerings.
This means most projects can have an outcome that is equivalent to 4 or 5 Star Green Star interiors anyway, and he says most of the company’s recent projects have achieved this.
“The normal stuff is just embedded now. Now the thinking is, where can we push the limits?”
Waste the new frontier
In his own company’s office, waste is the new frontier.
Its efforts won ACORPP a CitySwitch award recently, as well as an increase in its tenancy NABERS rating from 4 Star to 5 Star.
Bateup says coffee cups were one of the items tackled. The staff are “big coffee drinkers” so to reduce the number of takeaway coffee cups, everyone was issued with a keep cup. The result is that 90 per cent of the time staff are not using takeaway cups.
Options were looked at for food waste, such as worm farms or composting, however, as one staff member has chickens at home, food waste now goes to her flock.
Plastic bags don’t go in the general waste, instead they are returned to the supermarket. Plastic water bottles are not used, as the office has water units that supply both hot water and chilled filtered drinking water. Refillable glass bottles are used in the boardroom.
Bateup says staff just get on with the changes as if they are normal.
In terms of energy use, attention was focused on office IT. Settings were adjusted to optimise efficiency, and there is always someone who has the task of going around the office at the end of the day and ensuring all screens are turned off.
The company’s IT provider also ensures all obsolete IT items are recycled or given to staff to take home.
Bateup says it was all “easy stuff” that doesn’t cost much.
“Most of these things are cultural,” he says. “It is about behaviour change rather than money – a matter of changing how you do things.”