Operational PerformanceOpportunities and ChallengesMichael SkeltonResearch and Knowledge Manager,Australia New Zealand
Overview• Understanding the Market Size• What Return on Investment can be Achieved• Capex vs Good Facility Management• Dri...
Electricity Price Projections  20%                                                                                        ...
Comparative Commercial Sector SizesTenant Drivers Differ Dramatically                                                     ...
Australian Property Investment Market        Industrial,        $52.00bn                                         Office,  ...
Victoria – Total Office Stock               Number of Buildings                      Area of Buildings                    ...
Lack of New Office StockNew Office Construction Volumes                                  Source: Construction Forecasting ...
Australia’s Ageing Office Stock
Recent Studies
Improvement Asset Study     CBD Tower              Level 1        Level 2        Level 3     NPV of Investment    -$19,000...
Distribution of Base Building Energy Use                                                           Domestic Hot Water  Ten...
Typical Capital Cost Step ChangeBase Building Office – Capital cost and emissions savings     kgCO2/m2                    ...
Avoiding ObsolescenceVacancy Rate Sensitivity on Net Present Value                                                Source: ...
Reducing Base Building Energy Outgoings
However - ‘Typical’ Doesn’t Really Exist  Impact of existing condition – 1.5 to 4.5 Star Upgrade        Low Capex Required...
Energy Efficiency Drivers in theOffice Market
Government Leased Area    25,000,000    20,000,000                                  Other    15,000,000                   ...
What can we achieve? Existing Buildings are the Key!                       Emissons (Mt of CO2-e per annum)   25          ...
Where are Incentives Required                                                            Larger Incentives Required       ...
Incentives – What Currently Exists... • Green Building Fund • Low Carbon Australia (Carbon Trust) • Tax Breaks for Green B...
Human Resources       the Biggest Incentive!
Business Expenses - Tenants                                           Depreciation and Amortisation                       ...
Staff Response when asked “What Provides Improved...”             Job Satisfaction                                       E...
Environmental DriversEmbodied Energy and Water
Embodied CarbonCase Study – Educational Facility and Hospital Building                                                Sour...
Thank YouMichael Skeltonmskelton@davislangdon.com.au
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Michael Skelton – Facility Management in a changing climate

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Michael Skelton – Facility Management in a changing climate

  1. 1. Operational PerformanceOpportunities and ChallengesMichael SkeltonResearch and Knowledge Manager,Australia New Zealand
  2. 2. Overview• Understanding the Market Size• What Return on Investment can be Achieved• Capex vs Good Facility Management• Drivers and Incentives• Financial Implications of the ‘x’-factors
  3. 3. Electricity Price Projections 20% 20% 15% 15% 10% 10% 10 Year Average = 6% 5% 5% 20 Year Average = 4% 0% 0% Annual Change Forecast -5% -5% Source: Adapted from ABS 6401.0 (Australian Electricity Index)
  4. 4. Comparative Commercial Sector SizesTenant Drivers Differ Dramatically Total Market Size (m²) Hotel 27% Office Office 23,574,853 (NLA) 41% Shopping Centre 18,563,434 (GLAR) Hotel 15,975,922 (GIFA) Shopping Centre 32% Source: Property Council of Australia, Davis Langdon Research
  5. 5. Australian Property Investment Market Industrial, $52.00bn Office, $92.00bn Retail, $87.00bn Source: RICS, Davis Langdon Research
  6. 6. Victoria – Total Office Stock Number of Buildings Area of Buildings CBD 18% Regional Regional 9% 17% CBD 46% Metropolitan 45%Metropolitan 65%
  7. 7. Lack of New Office StockNew Office Construction Volumes Source: Construction Forecasting Council
  8. 8. Australia’s Ageing Office Stock
  9. 9. Recent Studies
  10. 10. Improvement Asset Study CBD Tower Level 1 Level 2 Level 3 NPV of Investment -$19,000,000 -$15,000,000 $7,000,000 IRR of Investment 4.2% 5.1% 10.0% Fringe High Rise NPV of Investment -$11,700,000 -$2,650,000 $4,200,000 IRR of Investment 5.4% 9.2% 11.2% Suburban Office NPV of Investment -$1,900,000 -$1,000,000 $200,000 IRR of Investment 3.4% 7.7% 10.9%
  11. 11. Distribution of Base Building Energy Use Domestic Hot Water Tenant condenser water loop Hydraulic Servicing and cooling tower f ans 2% 2% $ $ Mech Exhaust 7% Heating/Cooling Outside Lighting 24% 5% Toilet, stairs and plant room lighting 5% Elec Reheat Foyer lighting 0% 1% Heating Gas 3% Lifts 11% $ AHUs 25% Carpark Lights 5% Carpark Fans $ 4% Pumps in Plant Room 2%
  12. 12. Typical Capital Cost Step ChangeBase Building Office – Capital cost and emissions savings kgCO2/m2 $/m2 Baseline Step 1 Step 2 Step 3 Step 4 Step 5 Step 6 500 $1,000 450 $900 400 $800 350 $700 300 $600 250 $500 200 $400 150 $300 100 $200 50 $100 0 $0 2.0 Star 2.5 Star 3.0 Star 3.5 Star 4.0 Star 4.5 Star 5.0 Star Cost Range GHG Saving (LHS) Mean Cost (RHS) Source: Davis Langdon Research
  13. 13. Avoiding ObsolescenceVacancy Rate Sensitivity on Net Present Value Source: Davis Langdon Research
  14. 14. Reducing Base Building Energy Outgoings
  15. 15. However - ‘Typical’ Doesn’t Really Exist Impact of existing condition – 1.5 to 4.5 Star Upgrade Low Capex Required – Well Maintained High Capex Required – Poorly Maintained Per Year tonnesBuilding NLA 10,000 sq. m kgCO2/m² CO2 Building NLA 10,000 sq. m 120.0 1,200Building Age 15 years Building Age 15 years 100.0 1,000Base Building (Existing) 1.5 Star NABERS Energy Base Building (Existing) 1.5 Star NABERS Energy 80.0 800Base Building (Upgraded) 4.5 Star NABERS Energy Base Building (Upgraded) 4.5 Star NABERS Energy 60.0 600Green Power Included Yes (1 Star) Green Power Included Yes (1 Star) 40.0 400Total Capex $1,111,320 Total Capex $4,358,400 20.0 200GHG Savings (Actual) 1,012 tonnesCO2/year GHG Savings (Actual) 1,012 tonnesCO2/year 0.0 0Equivalent Passenger 166 1.5 to 4.5 Star Equivalent Passenger 166Vehicles Green Power Vehicles Energy EfficiencyBuilding Class B-Grade Building Class B-Grade
  16. 16. Energy Efficiency Drivers in theOffice Market
  17. 17. Government Leased Area 25,000,000 20,000,000 Other 15,000,000 State and Territory (Leased) Commonwealth Government (Leased) 10,000,000 5,000,000 26% Government Leased 0 NLA Source: Government Property Group, Davis Langdon Research
  18. 18. What can we achieve? Existing Buildings are the Key! Emissons (Mt of CO2-e per annum) 25 Forecast Estimated Trajectory if 20% of Existing 20 Buildings <2.5 Star upgraded to 4.5 Star 15 10 Total GHG from Office Sub-Sector 5 0 Source: Adapted from AGO 1999 & DEWHA 2009, Davis Langdon Research
  19. 19. Where are Incentives Required Larger Incentives Required High CO2 Abatement High Cost of Abatement Low Level of Industry Investment without Grants/Green Depreciation (Investment and Awareness of Cost to Industry should be Focussed Here) $300 $300 12 Value for Money from $250 $250 Grants/Accelerated Depreciation/etc $200 Maximised by Targeting These Initiatives $200 Cost of Abatement Cost of Abatement 11 $150 $150 10 $100 $100 9 $50 $50 8 7 $0 $0 6 -$50 5 Width Indicates Size of Abatement -$50 2 3 4 (Tonnes CO2 Over Time Horizon) -$100 1 -$100 Minimal Incentives Required Low CO2 Abatement Negative Cost of Abatement Higher Levels of Industry Investment (Government and Industry Commentators Focus Too Much on These Figures)
  20. 20. Incentives – What Currently Exists... • Green Building Fund • Low Carbon Australia (Carbon Trust) • Tax Breaks for Green Buildings • City of Melbourne, 1200 Buildings Project • Sustainable Melbourne Fund • Victoria Energy Efficiency Target
  21. 21. Human Resources the Biggest Incentive!
  22. 22. Business Expenses - Tenants Depreciation and Amortisation IT Equipment Expense 1% 1% Telephone and Data Other Expenses 1% 10% Training Travel and Motor Vehicle 2% 3% Rent/Outogings/Fitout (Ex Electricity) 6% Fees 13% Electricity 0.2%Employee Remuneration and Benefits 63% Tenant’s Focus ??? Source: Davis Langdon Research
  23. 23. Staff Response when asked “What Provides Improved...” Job Satisfaction Effect of: •Technology •Pay Incentives •Advancement Opportunities •Work-Life Balance Effect of Workspace Source: CABE & BCO
  24. 24. Environmental DriversEmbodied Energy and Water
  25. 25. Embodied CarbonCase Study – Educational Facility and Hospital Building Source: Davis Langdon
  26. 26. Thank YouMichael Skeltonmskelton@davislangdon.com.au

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