47 Australian office buildings added to list of high sustainability rated assets in the past FY

AUSTRALIA, 6 FEBRUARY 2023 – Over the past financial year, 47 Australian office buildings have been added to the national list of assets with highly rated sustainability credentials, achieving a 5.5 and 6 star NABERS rating, without green power.

According to JLL’s research report, The Race to Decarbonise Australian Cities, only 154 CBD office assets nationally achieve 5.5 or 6 stars NABERS, and a further 95 in non-CBD markets.

JLL’s Head of Strategic Research – Australia, Annabel McFarlane said, “The volume of highly rated assets is still low and the rate of change is slow. But over the past financial year there have been noticeable improvements with 47 additional 5.5 and 6 star assets nationally, without green power. The total number has increased by 22% from 202 in 2Q 2021 to 249 in 2Q 2022.

“What this is showing is that over the past financial year industry stakeholder understanding of the real estate sector’s role in decarbonising our cities has matured,” said Ms McFarlane.

Back in 2010, the Australian Government introduced the Building Energy Efficiency Disclosure Act, compelling building owners to disclose a NABERS Energy rating for their premises at the point of sale and lease. The impact of the policy resulted in a steep increase in ratings.

As at 2Q 2022, 56% of assets in JLL-tracked office markets have a NABERS energy rating. Although volume of rated assets hasn’t changed greatly over the past year, the energy efficiency of rated assets has.

JLL’s Head of Sustainability – Australia & New Zealand, Connor McCauley said, “The good news is that mandatory reporting of assets for sale and lease has been instrumental in reducing emissions intensity by more than 40% in these assets since 2012.

“So we are seeing Australian cities embracing the decarbonisation challenge as the race to zero emissions speeds up. But we still aren’t getting the cut-through, with over 80% of buildings in Australia still without green building ratings. So more needs to be done outside of the Premium/A-Grade office assets where good progress has been made.

“Our estimates using NABERS figures show that Sydney is leading the way across Australia, with 31% of all Sydney CBD office assets rated 5.5 stars and above. 28% of all Melbourne’s CBD stock is rated 5.5 stars and above followed closely by Brisbane at 24% in their respective markets. Canberra, Perth and Adelaide are 17%, 15% and 14% respectively,” said Mr McCauley.

JLL’s report, The Race to Decarbonise Australian Cities – What has changed in a year? assesses how far our office markets have come in the past financial year and actions being adopted by regulatory authorities to accelerate change. It reveals Australians are embracing the focus on sustainability but the challenge is significant and increasing regulation is likely in coming years.

Ms McFarlane said, “A highly transparent sustainability framework is a catalyst for change. State Governments have emerged as a key driver of change within Australian cities. As one of the largest occupiers of built space within cities, most State Governments are also choosing to use their own occupancy of both leased and owned to influence energy performance for the buildings they occupy.

“In Australia, the commonwealth government, state governments and local councils have reporting requirements designed to address environmental factors. Increasingly, reporting requirements and planning regulations are addressing sustainability and climate change that assets owners and developers are required to adhere to.”

Sydney is leading the way in climate change policy settings but reaching Sydney’s net carbon zero target date in 2035 (the NSW target is 2050) will still be a test, according to JLL.

In September 2022, a new Sustainable Buildings State Environmental Planning Policy (SEPP) was unveiled, setting minimum standards for energy, water and thermal performance in new homes, extending BASIX (building sustainability index) rating standards to commercial buildings and requiring the measurement of embodied carbon. Earlier, City of Sydney councillors voted unanimously in favour of planning controls that will require all new and major redevelopments, including offices, hotels and shopping centres, to meet minimum energy efficiency standards by 1 January 2023 and achieve net zero operationally by 1 January 2026.

“We can expect QLD, SA, ACT and WA state and local governments to look to the lead of Sydney, as well as Melbourne, in coming years,” Ms McFarlane noted. “Policy settings adopted overseas will be closely monitored for success and potentially adopted in Australian cities as net carbon zero target dates approach.”

Mr McCauley concluded, “Widening the NABERS ratings framework to include measurement of more sectors (as it has recently done with industrial), tightening the rules and transparency around the use of offsets and establishing an embodied carbon measurement tool are all important initiatives that will be welcomed by asset owners, capital partners, governments and occupiers alike. Transparency and data availability are key for decision making.”