Commercial Real Estate News
Large Opportunity to Transform Australia's Office Market in Play
According to CBRE Australia, more than 1.2 million square meters of premium and Grade A office space in Australia is ripe for energy efficiency upgrades to attract office occupiers prioritizing ESG in their lease decision making.
That's one of the conclusions from CBRE's latest NABERhood Watch research report, which highlights that, while there's been 22% uplift over the past five years in Australian office buildings with a NABERS Energy rating of 5 Star or above, circa 13% of the country's Premium and Grade A office stock has a rating of only 4.5 Stars.
"This represents more than 1.2 million square meters of office space where there's an opportunity to both "do good" and tap into the growing pool of office occupiers prioritizing ESG," Mr. Chopra said.
"It's also apparent that age is no barrier when it comes to ESG upgrades, with circa 43% of the NABERs rated "vintage" offices built pre 2000 having a rating of 5 Stars or above."
Rising energy costs are expected to put even more emphasis on NABERS upgrades, given that energy makes up 10-15% of the operational cost of office building.
"In today's high energy cost environment, the business case is easier to justify," Mr. Chopra said.
"Competition to attract the best tenants is another driver, with our analysis showing a 7% spread between the occupancy rates of buildings with 4 Star NABERS Energy ratings compared to their 5.5 Star and 6 Star peers. That widens to 24% for buildings rated 3 Star or less."
From a dollars and cents perspective, the report highlights a 2-4% rent advantage for each additional NABERS star when comparing buildings within each city CBD location.
There is particularly strong evidence of rental premiums in Perth, with the potential for that differential to grow given the heightened Resources and Mining Services sector focus on ESG outcomes.
"Our analysis also highlights a slight correlation between cap rates and NABERS ratings. There is a slight premium for 6 Star rated buildings and a slight discount for 4.0 Star rated buildings, although valuations are also impacted by location and cashflow strength," Mr. Chopra noted.
