Green Buildings now big business

By Nick Thomas and Emma Gingell.

Key Points:
Green Buildings are red hot in Australian property markets today, and indications are that they will only become more common. Current challenges include ensuring an appropriate interface among the various project documents for a Green Building, and anticipating the likely regulatory landscape for Green Buildings.

Green Buildings are red hot in Australian property markets today, and indications are that they will only become more common. Eighty-four percent of respondents to a survey conducted in the Green Building Market Report 2006 believed that the growing demand for Green Buildings from Government sectors and large corporate tenants meant that Green Buildings are no longer a niche occurrence.[1]

Green Buildings have the attention of policymakers, regulators, property industry stakeholders and even judges. A legal challenge to the concept plan approval for one of Sydney’s most significant urban development sites was recently launched, claiming that the approval was invalid because the Minister for Planning did not address adequately the principles of ecologically sustainable development ("ESD") in considering the concept plan proposal.[2]

In this article, we outline what Green Buildings are, why are they becoming so popular, and what challenges are arising as new and existing buildings turn green.

What is a Green Building?

There is no universally accepted definition of a Green Building. They are, however, often characterised by superior efficiency in energy and water use, use of natural light and ventilation, and waste reduction, when compared with other buildings in a similar class.

The Green Building Council of Australia ("GBCA") defines Green Buildings as "buildings which incorporate design, construction and operational practices that significantly reduce or eliminate the negative impact of development on the environment and occupants". The definition then lists a number of issues which a Green Building strategy may address.[3]

Green schemes

There are many available ratings systems and other initiatives to encourage green development or refurbishment. Schemes vary on a number of criteria, including:

• the type(s) of buildings to which they apply (eg. residential, commercial, industrial, large-scale retail, education, health care, and sub-categories of these)
• whether they are voluntary (which is most common), or mandatory (through either a legislative regime or the application of government guidelines, such as those for government occupiers)
• the range of sustainability measures they apply; and
• the timing of certification in a building's life cycle (some focus on design and construction, while others focus on operational performance).

The GBCA "Green Star" scheme is the most comprehensive and one of the best-recognised in Australia. It is a voluntary environmental rating scheme which rates the performance of new and existing buildings according to their management, energy efficiency, water efficiency, indoor environment quality, transport, material selection, land use and ecology, and emissions. The Green Star scheme focuses on environmental performance at various stages of a building’s life (ie. "design", "as built", "fit out" and "existing asset").

Another commonly used scheme is the Australian Building Greenhouse Rating ("ABGR") scheme, a very well-recognised 5 star energy rating scheme for commercial buildings. This scheme is directed primarily at the operational performance of buildings (drawing on 12months of operational data), but may also be applied to new buildings via a "Commitment Agreement". ABGR is incorporated as an element of the Green Star scheme, and more recently has been incorporated into the office tool of the National Australian Built Environment Ratings System ("NABERS").

Most other schemes tend to focus on energy and water consumption. NABERS, a national performance based ratings system established by the Federal and NSW Governments, is a recent example.

BASIX (or the Building Sustainability Index), a NSW Government initiative, is currently the only statutory Green Building scheme in Australia. The BASIX scheme operates through the development control regime under the Environmental Planning and Assessment Act 1979 (NSW). It involves a certification mechanism which requires energy and water reduction targets for new residential buildings and alterations to existing residential buildings, and then enforces the measures a developer selects to achieve those targets via conditions of development approval.

In 2006 the Building Code of Australia was amended to include minimum standards for energy efficiency. These amendments will apply to all classes of commercial and public buildings being refurbished, altered or extended, as well as new buildings. Regulatory regimes in most jurisdictions require compliance with the Code.

Increasingly, State and Federal Governments have adopted a "lead by example" approach and are establishing guidelines which require minimum sustainability criteria for buildings they occupy.[4]

Benefits of Green Buildings

Advocates of Green Buildings claim they provide a range of benefits beyond the environmental, and could benefit all stakeholders. Some of the claimed benefits include:

• Developers – enhanced marketing potential through positive publicity, higher building valuations and future proofing against potential increases in water and energy costs, as well as reduced liability risk from the operational fitness of the building.
• Investors – a more attractive investment, especially for the burgeoning socially responsible investment managed funds.[5]
• Owners and managers – lower operating costs for energy and water consumption and waste management, as well as an increased ability to attract tenants concerned about sustainability (and there appear to be plenty of them).
• Tenants – enhanced reputation of occupying a Green Building, which assists in attracting and retaining more talented employees, as well as improved health and productivity of occupants (eg. reduced tiredness, headaches and absenteeism through better quality ventilation, illumination and office design).
• Community – reduction in the environ-mental impact of the built environment (through effects such as reduced emissions and water consumption).

Challenges

In achieving the benefits highlighted above, Green Buildings face a number of challenges. The potential for increased construction cost is perhaps the most publicised challenge, although there is a range of views on this issue.[6]

The selection of an appropriate rating scheme can also be a challenge. There may not be a suitable scheme available for some types of buildings, which makes the marketability and measurement of "green building" claims difficult.

If more than one scheme is available, the decision on which to apply will depend on the criteria we mentioned earlier and the requirements of the stakeholders involved in the project in question.

The interface of the various project documents will be very important, especially where the relevant rating scheme depends on the operational performance of a building. For example, developers may be required to build or refurbish so as to satisfy the structural requirements for the intended Green Building rating, owners and managers may be required to operate and maintain building systems (including auditing and reporting) so as to ensure the intended rating is maintained, and tenants may be required to adhere to sustainable occupational practices covering matters such as fit-out design, occupancy density and even the management of occupant behaviour.

It’s essential that this be recognised early in a project’s life, so that appropriate goals are documented and rights and obligations may be assigned effectively among the various stakeholders.

One of the most significant challenges, from a policy perspective, is anticipating the likely regulatory landscape for Green Buildings, particularly given the current lack of consistency across rating schemes and jurisdictions. One regulatory model which has been proposed would involve setting mandatory minimum standards whilst allowing the market to govern the use of higher standards. Another, which has recently been adopted by the Brisbane City Council, provides financial incentives (by means of grants) for enhanced sustainability in building design.

Whether additional regulation is needed at all, and what shape that regulation will take, may depend on the pace at which the Green Building philosophy is embraced in all property sectors.

The authors gratefully acknowledge the assistance of Nigel Howard of BRANZ Pty Ltd in the preparation of this article.

 

[1] Property Council of Australia, “Green Buildings No Longer a Niche Occurrence” (December 2006) Property Australia.

 

[2] Matthew Drake-Brockman has commenced proceedings in the NSW Land and

Environment Court

against the NSW Minister for Planning and Carlton and United Breweries NSW Pty Ltd, in relation to the proposed residential and commercial redevelopment of the former CUB brewery site in Chippendale, Sydney.

 

[3] Green Building Council of Australia, The Dollars and Sense of Green Buildings (2006). The definition indicates that a Green Building will have strategies to address energy efficiency, greenhouse gas emission abatement, water conservation, waste avoidance, reuse and recycling, pollution prevention including noise, water, air, soil and light pollution, enhanced biodiversity, reduced natural resource consumption, productive and healthier environments, and flexible and adaptable spaces.

 

[4] The Australian Government’s Energy Efficiency in Government Operations Policy, for example.

 

[5] The Property Council of Australia cites figures to suggest that the value of SRI managed funds has grown by 3,587 per cent since 2000 – Making Cents From SRI (December 2006).

 

[6] For example, the GBCA cites a 2003 article in the Australian Financial Review which refers to estimates that, on average, green initiatives add between 5 percent and 10 percent to the capital costs, and then questions this estimate, suggesting instead that capital costs can be much lower – The Dollars and Sense of Green Buildings (2006) p 64.

For further information, please contact Nick Thomas.