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Sustainable property industry calls for urgent action on mid-tier buildings

Reduce commercial building disclosure below 1000 square metres and expand it to other sectors; provide a 50 per cent tax deduction on building upgrade costs; make governments commit to net zero operation in buildings by 2030. These are just a few of the measures being proposed by a coalition of sustainable industry associations and local governments in order to tackle the poor energy efficiency plaguing Australia’s 80,000 mid-tier buildings.

While Australia leads globally on sustainability at the top tier of the property market, buildings that aren’t Premium or A-Grade account for 80 per cent of commercial stock, and 50 per cent of total floor space. Filled with “outdated and inefficient technologies”, they’re operating “well below their potential”, the Opportunity knocks: Accelerating energy efficiency for mid-tier buildings report says.

“We know that high performing buildings in Australia consume around a third less electricity and produce a third fewer greenhouse gas emissions than the average mid-tier building – so we are talking about a massive opportunity to improve efficiency and cut emissions,” Jonathan Cartledge, head of public affairs at the Green Building Council of Australia, said.

His organisation is one of the groups behind the report, along with the Property Council, CitySwitch, Energy Efficiency Council, AIRAH, the Cities of Sydney and Melbourne, and the Facility Management Association.

“Many are familiar with the challenges of improving the performance of the older building stock across our cities,” Mr Cartledge said. “But these challenges will only be met through a combination of measures delivered through government leadership and with industry support.”

The five measures being proposed are:

  • Reducing the Commercial Building Disclosure threshold to buildings below 1000 square metres to a point that is cost-effective
  • Expanding disclosure requirements to new sectors including but not limited to mid-tier building stock, and with a priority focus on office tenants
  • Supporting business through targeted tax incentives for building upgrades in the form of a one-off deduction of 50 per cent of the cost of upgrades for those captured by expanded CBD legislation
  • Governments leading by example through setting targets for net zero emissions across government operations by 2030 with strengthened requirements for transparency and performance of government tenancies
  • Investing in research to improve understanding of energy opportunities across the building sector

The report’s suggestions may not be welcomed in all sections of the property industry, particularly calls to further reduce thresholds and expand coverage of Commercial Building Disclosure legislation.

Back in 2013 the federal government had expansion of commercial building disclosure to sectors like shopping centres, hotels, schools and hospitals, but lobbying saw the proposed changes dropped.

The report goes further, saying that tenants should be made to disclose their performance, and in the absence of sale or lease, which triggers the CBD requirements, buildings should be required to disclose performance every four years.

Getting to mid-tier owners is another problem, with a lack of awareness and information for building owners and operators, particularly private owners.

The sector is also “highly fragmented”, the report notes, with varied ownership structures that contribute to market failures like the classic split incentive between owners and tenants.

“The market failures characteristic of sub-prime buildings make them a natural priority for governments to lead practical policy interventions that will deliver real benefits across the economy,” Property Council of Australia policy manager – sustainability and regulatory affairs Francesca Muskovic said.

“Currently, the mid-tier sector is poorly positioned to deliver greater energy efficiency or help reduce peak demand for energy, both of which are increasing priorities for governments.”

The report tasks governments with kicking off a move to higher standards, calling for a commitment to NABERS Tenancy rating in line with the base building rating and Green Star ratings for all government tenancies.

Finally the report calls for research to quantify the emissions reductions needed to deliver the Paris Agreement target of zero net emissions by 2050, as well as development and testing of minimum lease standards with a view for them to be adopted by 2020.

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