Older office buildings must get with the times: Colliers

Larry SchlesingerDecember 8, 2020

Owners of older CBD office buildings will need to focus on improving their sustainability as well enhancing both their external and internal attributes to attract both tenants and future investors, according to new research by Colliers. 

A white paper called Getting Your Building Ready for the Next Decade and Beyond co-authored by Colliers and engineering firm Arup says “whole of building sustainability and workspace performance” is now a key to meeting tenant requirements and increasing property values. 

It comes as more than three-quarter of respondents to Colliers’ 2011 Global Investor Sentiment Survey (77%) said owning obsolete property is a greater concern than 10 years previously.

In Melbourne, about 80% of office buildings are more than 20 years old. According to Colliers, it’s a “relatively recent phenomenon” in Australia that large and growing number of office buildings in Australia are reaching the 20- to 40-year age bracket. 

Recently Charter Hall sold a 14 storey, 8,000-square-metre office building on Queen Street in the Melbourne CBD with a zero NABERS (National Australian Built Environment Reporting System) sustainability rating to a Singaporean developer for $25.5 million, nearly $7 million below the 2007 purchase price of $32 million.

Owners of older office building with similarly poor sustainability ratings will need to make improvements or face making a loss. 

Along with perennial factors such as location, floor plate size, core configuration, service provisions and amenities, sustainability has grown in importance since 2004, following the introduction of the green star rating system by the Green Building Council of Australia, the white paper says. 

“A bad [sustainability] score has the potential to eliminate a building from consideration,” say report authors Nerida Conisbee, national director of research at Colliers, and Adam Leggett, senior sustainability integrator at Arup. 

“More than ever building ownership requires a clear strategy to achieve its returns. There needs to be both an internal and external focus with a clear vision for the requirements of the target tenant groups and addressing external influences,” they say. 

Sustainability is especially important for offices given that state and federal government departments make up about a quarter of all office tenants and it is the government that is leading the push for high levels of sustainability in buildings. 

“High NABERS ratings and green star ratings are being sought on most new buildings and the carbon tax will further drive the requirement for this in existing buildings,” say Conisbee and Legett. 

“The federal government, through the COAG National Energy Strategy, are intending to set rising energy standards for all buildings. Commercial buildings disclosure is now in place for 2,000 square metre plus offices and will spread to other building sizes and types.” 

Aspects of buildings that owners should consider addressing include: 

  • Façade performance - “often overlooked in pre-purchase consideration and upgrade decision making. Older buildings and even many newer buildings can have significant air leakage, known as infiltration, through the façade which can drastically increase energy consumption and reduce occupant comfort. 
  • Location – be mindful of the changes that are happening around the building. As an example the development of Docklands in Melbourne has had a transformative influence on the Western Core of the CBD with Barangaroo in Sydney expected to have a similar effect on neighbouring commercial zones. 
  • The semi-public realm around the building - enhanced by providing indoor and outdoor spaces, allowing space for rotating art displays and providing green features. This activation of the private and semi-public space can generate off-peak activity and create an engaging and valued building location. 
  • Technology upgrades - Using real-time displays, for example, increases knowledge about public transport arrival times and can encourage the exploration of public transport as a commuting mode. 

The report recommends that building owners should undertake a strategic review “focusing on opportunities for increasing value and tenant attraction that might otherwise not be identified”. 

“The property agent role is crucial, as an understanding of the tenant profiles, market demand and experience of managing tenant moves will underpin any upgrade strategy,” the white paper says.

Larry Schlesinger

Larry Schlesinger was a property writer at Property Observer

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