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. 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. Comparative Commercial Sector Sizes
Tenant 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. Australian Property Investment Market
Industrial,
$52.00bn
Office,
$92.00bn
Retail,
$87.00bn
Source: RICS, Davis Langdon Research
6. Victoria – Total Office Stock
Number of Buildings Area of Buildings
CBD
18% Regional
Regional 9%
17%
CBD
46%
Metropolitan
45%
Metropolitan
65%
7. Lack of New Office Stock
New Office Construction Volumes
Source: Construction Forecasting Council
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. 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. Typical Capital Cost Step Change
Base 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
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 tonnes
Building NLA 10,000 sq. m kgCO2/m² CO2 Building NLA 10,000 sq. m
120.0 1,200
Building Age 15 years Building Age 15 years
100.0 1,000
Base Building (Existing) 1.5 Star NABERS Energy Base Building (Existing) 1.5 Star NABERS Energy
80.0 800
Base Building (Upgraded) 4.5 Star NABERS Energy Base Building (Upgraded) 4.5 Star NABERS Energy
60.0 600
Green Power Included Yes (1 Star) Green Power Included Yes (1 Star)
40.0 400
Total Capex $1,111,320 Total Capex $4,358,400
20.0 200
GHG Savings (Actual) 1,012 tonnesCO2/year GHG Savings (Actual) 1,012 tonnesCO2/year
0.0 0
Equivalent Passenger 166 1.5 to 4.5 Star Equivalent Passenger 166
Vehicles Green Power Vehicles
Energy Efficiency
Building Class B-Grade Building Class B-Grade
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. 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. 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. 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
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
