Bottom line benefits of green building

With more than $1 billion in industrial and commercial assets, Frasers Property Australia is using Green Star to reposition assets, entice new tenants and keep old ones, says General Manager Investment Property Chamoun Malki.

Green Star has reshaped Australia’s CBDs, and a third of office space in our city centres now boasts Green Star certification.

The story has been less rosy in industrial and suburban office markets. But Frasers Property, with a portfolio that consists primarily of logistics and industrial assets and suburban office accommodation, has embedded sustainability into its strategy and is reaping the rewards.

The company achieved the nation’s first Green Star portfolio rating using the Green Star – Performance rating tool in 2016, and now has 87 Green Star ratings and a further 14 in the pipeline.

Frasers Property also topped the GRESB table last year for all diversified office, industrial and non-listed funds.

Chamoun, who manages the company’s portfolio of commercial and industrial properties, says “Frasers Property lives and breathes sustainability and ratings like Green Star and GRESB bring that commitment to life”.

Most companies pursuing GRESB ratings are looking to demonstrate transparency and accountability to shareholders who are increasingly assessing their exposure to climate risk.

Frasers Property, which was privatised in 2015, isn’t seeking third party investors or managing public funds. But it is seeking tenants.

“We use Green Star because our customers are increasingly asking us about it,” Chamoun says.

“In the past, we had to educate the market on Green Star. Now people are actively asking for an asset’s environmental credentials – and a Green Star rating is proof of those credentials.”

Green ratings are most useful when pitching for pre-commitments from new tenants, Chamoun says.

“Our Green Star – Performance portfolio rating, and our worldwide leadership rating with GRESB appeal to many of our customers and we are demonstrating our genuine commitment to sustainability. It isn’t just at a building-by-building level, but across our whole portfolio.”

The portfolio commitment may be world leading, but the building-by-building story uncovers some impressive outcomes.

2 Southbank Boulevard in Melbourne, a 55,000 sqm premium office tower, recently became only the second in Victoria and one of just a handful of buildings around the country to achieve a 6 Star Green Star – Performance rating.

The company’s headquarters in Sydney’s Rhodes, with its 6 Star Green Star certification and WELL rating, showcases how innovative, sustainable office environments can also be delivered in the suburbs.

And Horsley Drive Business Park in Sydney’s Wetherill Park is on track to be Australia’s first 6 Star Green Star industrial asset.

While Chamoun concedes that 99 per cent of industrial customers prioritise cost above all else, he says it’s up to his company to demonstrate how sustainability can provide a direct link to savings.

“Where a sustainability feature has a cost impact, this is often something the customer asks to leverage out, but we endeavour to find alternative solutions because we don’t want to win a deal that compromises our portfolio rating.

“We are passionate about this. Sometimes a sustainability initiative may cost us without an immediately obvious payback, but we’ll still do it because it helps us reposition assets as leases expire. Sustainability upgrades have an impact on value and how assets are perceived in the market.”

Chamoun shares a recent example of one large suburban office tenant occupying 15,000 sqm in Melbourne.  

“We negotiated a deal which included new end-of-trip facilities, upgrades to lighting and solar hot water service. These sustainability initiatives helped the tenant renew. It’s a benefit to the tenant, enhances the premises, reduces occupancy costs, improves the building value and helps us with our portfolio rating – so it’s a win/win for everyone.”

Frasers Property’s team is planning to increase its portfolio rating to 4 Star Green Star by next year, and Chamoun says “our focus is on ensuring our current portfolio is repositioned as it comes up for renewal”.

“We are absolutely committed to embedding sustainability into everything we do.”

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