Amid darkening clouds on the office market horizon it seems you can still find room for a major uptick in sustainability ratings and do well financially.
In what might be a first for Brisbane, Forza Capital, a fund manager with a penchant for taking older buildings and bringing them up to high sustainability and efficiency standards, has achieved a six star NABERS energy rating for an office building in South Brisbane.
The 4081 square metre building at 55 Russell Street was bought for $23.5 million in early 2019, with 33 per cent vacancy.
It is now fully leased for around $500 a sq m gross to government tenants and can offer a rare (and it’s claimed the only) 6 star NABERS rating for a whole existing building, and only one of six buildings in all that can boast the highest NABERS rating.
What’s more impressive, though, is the upgrade from around 4 stars (according to internal company calculations) to 6 stars has been at very low cost – at least by comparison with the purchase price.
Company director Adam Murchie said the upgrade was “not much”, around just $100,000, thanks to focusing on the “low hanging fruit” in the scope of work.
Was additional value recognised for the property from a valuation perspective, given that rentals have not moved from their original level?
“I think the building does manifest that extra value,” Mr Murchie said. It now offered efficiency gains and the security that there would be no big surprises down the track for the owners, he said.
“We’re not doing it for charity; economically we think it works – and from a holistic view, not just monetary.”
The work was relatively simple. “It was pretty much rejigging the 100 kilowatt solar array on the roof, bits and pieces like working on the metering, retuning the building,” Mr Murchie said.
“It was going back to what Craig Roussac [of Buildings Alive] was saying: making sure the BMS [building management systems] works properly. And having LED lights with sensor and better metering of the space so you know what’s common space and what’s tenant space.”
Fellow director Ashley Wain said that many of the sustainability improvements had come at relatively minimal cost, “yet these improvements allow us to reposition the asset and, in some cases, improve operating cash flows”.
The work was handled in partnership with K2 Private Property, whose senior facilities manager Aidan Lambeth said it is “often about ensuring a building runs the way it is designed, and the plant is efficiently maintained and monitored”.
Forza said other buildings with the same rating are 111 Eagle Street, 123 Eagle Street, 1 William Street – all in the CBD – and 100 Skyring Terrace, Newstead, and 2 King Street, Bowen Hills.
Mr Murchie said the process of transformation was a perfect fit for the team.
“We are just delighted with the rating outcome. ESG (environmental social governance) is an important part of our business and we enjoy extending ourselves to improve existing assets,” he said.
At 420 George Street, Brisbane, the team had turned a 0 NABERS star rated building into a 5 Star rated building.
At 10 Browning Street in South Brisbane, in the same block as the company’s Russell Street building, also with a 100 kW solar array, the company hopes to turn the 11,200 sq m office from a NABERS rating of about 3 stars to 5 stars. Bought for $65.5 million in 2016, additional work includes adding end of trip facilities and upgrading lighting in the building’s large car park with LEDs.
Mr Murchie said the idea of sustainability as a driver was growing.
“I think people are generally alive to the issue [of sustainability] and trying to do the best they can in terms of upgrades. We probably take it a step further than that. We seek out whatever is possible and where we can maximise value.”
Since the bushfires, coronavirus and black lives matter, there’s been a bit of pushback on sustainability, he said. But will it come back?
“It has to. The question is when it does, is it too late?”
Was there fear in the market about economic instability?
Mr Murchie said that so far, the market was holding up well but that was because the reality of the underlying situation was not well understood.
The economy was rife with “false overlays, with subsidies and standstills,” he said.
What the upshot will be is confusing for most people to read, he said.
“I’ve not had a client yet who says they understand it.”