92pc of corporate tenants want green offices

THE real estate sector remains crucial to Australia reaching its net zero emissions goals, with corporate tenants increasingly backing properties that boast strong green credentials.

According to a new report from the EY Net Zero Centre, 92% of corporate tenants are already more likely to stay in a commercial office with strong green credentials.

With 46% of corporate tenants saying they were prepared to pay a premium of up to 5% for office space with strong green credentials.

“The places where we live, work and play are responsible for a quarter of Australia’s greenhouse gas emissions. Achieving net zero is simply not possible without the real estate sector,” says Selina Short, built environment & resources leader at EY Oceania.

“A pivotal shift is underway as Australia’s largest companies face mounting pressure to disclose their climate transition plans and outline strategies to achieve their net zero commitments. The people holding the purse strings and those auditing risk are now responsible for net zero – and that is turning their attention to the environmental impact of the buildings they occupy today.”

Property companies are prioritising sustainable technology upgrades, with 95% prioritising LED lighting retrofits, 86% smart controls and 67% high-efficiency HVAC systems.

“Corporate tenants have spent the last few years setting net zero targets. But now, as the rubber hits the road, many companies are not moving fast enough,” said Davina Rooney, CEO of the Green Building Council of Australia.

“The decision of the Science Based Targets initiative to rescind its endorsement of more than 500 companies for failing to lay out credible goals aligned with the Paris Agreement is a clear sign of the times.”

“Australia’s leading property companies have spent two decades learning how to deliver the world’s greenest buildings. Now, we need the market to recognise green buildings for what they are – a risk mitigation strategy, a brand booster, a talent attractor and, as EY’s report shows, a value creator.”

Key initiatives from property leaders identified in the report include Cbus Property’s plan to reduce embodied carbon by 35% relative to business-as-usual building practices at its 435 Bourke Street asset.

In addition to Stockland’s scheme to trade solar energy among more than 50 shopping centre and logistics assets, that will allow Stockland to create a recurring income stream from 250,000sqm of solar panels, while trading excess energy across its portfolio.

With Atlassian’s $1.54 billion 39-storey hybrid timber skyscraper next to Sydney’s Central Station, owned by Dexus, to become the tallest commercial hybrid timber building in the world.

Furthermore, Charter Hall has declared 125 of its assets will be powered by 100% renewable energy by 2025.

Finally, Frasers Property Australia was identified for setting new benchmarks with the world’s first Living Building Challenge rating for a retail centre.

“Two decades of evidence confirms that buildings are among the ‘lowest hanging fruit’ of emissions reduction,” added Short.

“As finance teams begin thinking about how they’ll deliver on the net zero transition, their attention will turn to green buildings. But our report finds green buildings do much more than reduce energy consumption and emissions. They can also be a source of new value.”

The report identified electrification, energy efficiency, grid interactivity, powering with renewables and addressing embodied carbon as key to accelerating action and uncovering hidden value.

“Our research suggests neither tenants nor landlords have yet reaped the full benefits of sustainable building,” said Short.

“Most businesses have not landed on an ESG strategy that clearly identifies how to lift profits and create competitive advantage through sustainability in the built environment. The gold of green buildings is yet to be mined.”