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Commercial building disclosure program coming to a shopping centre near you? No siree!

The commercial building disclosure program – largely credited for lifting Australia’s office building stock to a higher energy efficiency performance – looks unlikely to be expanded to shopping centres any time soon.

According to draft documents obtained by The Fifth Estate as part of a review of the CBD program, shopping centres do not stand to benefit from mandatory disclosure.

Australian retail operations account for around 41 per cent of total non-residential carbon emissions per year, yet occupy only 14 per cent of all floor area.

The program ­– which requires information on a building’s energy performance to be disclosed when larger office spaces are sold or leased – arms buyers or tenants with better information about energy efficiency in a building and gives building owners and managers a better idea of how their building is performing and the associated cost.

Shopping centres are out: “Nothing to see here”

But the draft independent review documents prepared by the Centre for International Economics for the Department of Environment and Energy does not recommend further investigation into mandatory disclosure for shopping centres based on its preliminary analysis and the information gathered so far.

However, the draft paper found that the mandatory disclosure of energy efficiency or greenhouse gas performance should be investigated in detail for office tenancies, hotels, colocation data centres and private data centres.

According to the review, there is little evidence that behavioural issues lead to poor energy decisions in the shopping centre industry.

This is because shopping centres “tend to be larger professionally managed buildings that understand the cost trade-offs for different decisions impacting on energy use.”

It states that shopping centres in Australia are already across their energy use profile, and many voluntarily use NABERS or other energy efficiency information to “assist in decisions”.

NABERS estimates that 46 per cent of the shopping centres over 15,000 square metres are now rated (voluntarily). The report states that NABERS ratings for shopping centres have increased and energy intensity has decreased over time.

It also references data from the Shopping Centre Council of Australia that suggests NABERS rated shopping centres are performing no better than shopping centres without a rating.

The figures indicate that the energy costs of a sample of Victorian shopping centres that are rated is not lower than the energy costs of those that are not rated using NABERS.

“One shopping centre owner indicated that they had tracked their reduction in energy use over time and this was similar to what they could see from NABERS rated shopping centres.”

One explanation for this is that shopping centres owners, according to the report, tend to understand their energy use relative to others and they measured their energy performance even without NABERS.

There is a split incentive issue in the industry, where outgoings are paid by tenants, while energy efficiency improvements are paid for by the owner. This means saving from the energy efficiency upgrades are rarely felt by the owner but passed onto the tenant.

The report says that because tenants already have information on energy costs, regardless of whether or not the building is NABERS rated, the mandatory disclosure program wouldn’t really affect the split incentive issue any further.

Interestingly, it found that the split incentive problem does not seem to be having the same blockading effect on solar PV in shopping centres than other energy efficiency upgrades.

“The increasing focus on solar PV from shopping centre owners is interesting, because it does not suffer from this incentive issue.”

At the crux of the argument against mandatory disclosure is that shopping centres claim to already know what and how energy is being consumed in their buildings, and to be passing this information onto their tenants, even if they are not NABERS rated.

A NABERS Energy rating is reportedly less useful for tenants than direct information provided on estimated outgoings, which includes energy cost, when it comes to energy cost.

“This is because shopping centres can be quite different in their characteristics, leading to a wide range of energy intensity for a particular NABERS rating. Hence if the purpose is to inform tenants of their energy cost, a NABERS star rating would not be a good guide.”

Corporate social responsibility is deemed “of relevance” for shopping centre owners/investors, but “only one of many things of relevance to investors.”

The report found that unlike in the office sector, the link between better CSR outcomes and higher market demand is not as clear.

This is because for retail tenants, it’s all about location. “It will generally be difficult for a tenant to consider multiple shopping centres in a similar location, unlike for offices where there will be multiple office options in a similar location”.

There’s also less chance shoppers will choose a centre based on its energy efficiency choice.

“This differs to offices where there is both government and corporate demand for higher rated buildings.”

The report also says that if people do in fact choose a shopping centre because it has a high energy rating, then this would have the “perverse effect” of making people travel further and creating more transport-related emissions.

And “from an environmental perspective, the NABERS energy star rating can also diverge substantially from the GHG emissions intensity, because of differences in the shopping centre characteristics.”

The report states that a more “direct measure” of environmental performance would be GHG emissions per square metre of GLAR.

No more investigations

Although it rules against further investigation for the above reasons, the report “cannot rule out that mandatory disclosure may act as a shame factor for some shopping centre owners, thereby driving some change.”

The review process is ongoing and stakeholders and the public will be engaged in the future process.

The Shopping Centre Council of Australia did not return calls or respond to emails before time of publication.

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