Tyrone Hodge, risk adviser for property company JLL, addresses the NZ Green Building Council's Property Summit in Auckland.
Tyrone Hodge, risk adviser for property company JLL, addresses the NZ Green Building Council's Property Summit in Auckland.
Green-certified office buildings in Auckland sell for nearly 10% more than comparable ordinary buildings, according to a major new report by real estate services company JLL.
They also command almost 10% higher rents and have a vacancy rate more than six times lower than ordinary buildings.And their energy efficiency also makes them much cheaper to run.
Releasing the report yesterday, JLL’s global risk advisory leader Tyrone Hodge, who is based in Sydney, said the results mirror similar findings in Australia, Europe and the United States.
“This changes the conversation,” he told the NZ Green Building Council (NZGBC) Property Summit in Auckland.
“In places like Texas, building owners tell me they’re not worried about climate change. But they are worried about their energy costs and getting tenants.
“The report takes away the argument that green buildings were invented by a bunch of greenies trying to make us spend more money.
Andrew Eagles, NZGBC chief executive, called the report “an important milestone for New Zealand’s real estate market”.
“We know green buildings are a win for the environment, they often boast healthy, productive, efficient spaces for the occupants. This report now reinforces that it’s a win for building owners, developers, and investors too.”
Andrew Eagles, chief executive of the New Zealand Green Building Council. Photo / NZGBC
The report, “Turning green to gold: The impact of green certification on rental yields, cash flows, and values”, is the first of its kind in New Zealand.
It analysed data on all Green Star and NABERSNZ certified office buildings in Auckland, Wellington and Christchurch, and compared them to other buildings in the JLL datasets.
Green Star is commonly used for the design and construction of a building and considers environmental criteria as well as expected energy efficiency.
NABERS (National Australian Building Environmental Rating System) rates a building’s operational energy performance based on 12 months of occupancy.
Green Star rated: 10 Madden St in the Wynyard Quarter. Buildings like this are in high demand.
The report shows that ordinary office buildings on the JLL register have a 6.9% vacancy rate. But buildings with Green Star and NABERS ratings have a vacancy rate of only 1.5%.
The difference was less pronounced in Wellington and minimal in Christchurch.
But it was acute in Auckland, where the vacancy rate for ordinary buildings was 8.7%, but for buildings with high green ratings fell to 1.4%.
Rents for top-quality (P grade) buildings were analysed over the period 2020-2023. In Auckland, the $601 sqm average rose to $659 sqm: a premium of 9.7%.
These figures mirror those in other countries. JLL reports the rental premium for green office buildings is 9-12% in Australia, 7.1% in eight major markets in North America, 9.9% in nine major markets in Asia and 11.6% in London.
In regard to the overall value of the building, the report discovered a 5-star Green Star building in Auckland will have an average premium of 5.1%, while those with 6 Green Star and high NABERSNZ ratings attract a 9.7% premium.
Across Auckland, Wellington and Christchurch, that rose slightly to 9.8%.
Hodge told the NZGBC conference that “existing buildings are the real conundrum”.
That relates directly to the “old” CBD of downtown Auckland, where office tenants have been moving from non-green buildings on Queen St and nearby, to new Green Star and NABERS-certified buildings in Britomart, the Viaduct and Wynyard Quarter and around Victoria St West.
“Do you just bowl everything?” Hodge asked. “That doesn’t work. You cannot bring enough new buildings to market.” Renovation and retrofitting to green standards, he suggested, is the only viable answer.
HB Central is a renovated Green Star building on Queen St.
Speaking to the Herald, he said, “It’s important to talk about all the reasons we need to lower emissions. But this report makes it clear: even if you’re not into that, just follow the money. Being green is better for your bottom line.”
The gold standard is set by Copenhagen, which aims to be net zero next year. London has that target for 2030 and Sydney, San Diego and Munich plan to be net zero by 2035. Melbourne, Toronto, San Francisco and Stockholm have targeted 2040.
Auckland has a 50% net zero target of 2030, but no programmes are in place to achieve that goal. Like New Zealand as a whole, it targets 2050 for net zero.
To help with speeding that up, the Green Building Council has called on the Government to sign the Declaration de Chaillot. This is an agreement set up in Paris in March this year by the Buildings and Climate Global Forum, an initiative of the UN Environment Programme (UNEP).
The declaration binds signatories to “international cooperation that will enable progress towards a rapid, fair, and effective transition of the building and construction sector”. Seventy countries have signed so far.
Climate Change Minister Simon Watts also addressed the conference. “This is the critical decade,” he said.
Climate Change Minister Simon Watts. Photo / RNZ / Samuel Rillstone
He acknowledged that the NZGBC had challenged the Government to make low emissions standards mandatory. But he did not refer to the Declaration de Chaillot or the global forum, and did not make any commitments.
Instead, he suggested nobody needed to wait for the Government to act. “Just get on and do it,” he said.
JLL’s Tyrone Hodge told the conference that in Australian cities, the corporate sector – companies with tenancies in the CBD above 5000 sqm – is already doing that.
“In Sydney, 74% of CBD occupiers have net zero targets. In Melbourne, it’s 67%. If your building isn’t Green Star, you won’t find tenants.”
Simon Wilson is an award-winning senior writer covering politics, the climate crisis, transport, housing, urban design and social issues, with a focus on Auckland. He joined the Herald in 2018.
