'Building Better Returns' - The Australian Property Institute

To more fully assess the added value impact of higher NABERS energy ratings on the financial performance ofgreen office buildings, it is necessary to segment the analysis into the various NABERS energy rating levels. Assuch, Table 11 presents the impact of a higher NABERS energy rating on financial performance. Key featuresinclude:1. The green premium impacts in value are most evident in the higher NABERS energy ratings, particularly inthe 5 star NABERS energy rating category. This sees a 9% premium in value for the 5 star NABERS energyrating, compared to premiums of 1-3% in the lesser NABERS energy rating categories. NABERS energyratings of 3-4.5 showed similar green premiums of 2-3% in value, with the major green premium in value(9%) seen in the NABERS 5 star energy rating category. See Figure 1.2. Green premiums in the top NABERS energy rating categories also apply for reduced vacancies (Figure 2),reduced incentives (Figure 3), reduced outgoings (Figure 4) and reduced yields (Figure 5). In most cases, thegreen premium was clearly most evident in the 5 star NABERS energy rating category. While the NABERSenergy 5 star yield premium may be small (-0.15%), this converts to a substantive change in value.3. Lesser impact is seen for the rent premiums, being less than 1% in all NABERS energy categories;see Figure 6.Table 11. Green office building premiums: impact of NABERS energy rating*Panel A: NABERS energy rating2/2.5 3/3.5 4/4.5 5Gross rent 1.3% 1.3% 1.7% 2.4%Value 2.2% 4.4% 6.4% 12.8%Vacancy -4.4% -5.1% -7.8% -6.8%Incentives 5.3% 1.6% 0.6% -1.5%Yield 0.00% -0.08% -0.13% -0.22%Outgoings 5.5% 3.2% -0.3% -4.3%Panel B: NABERS rating (adjusting for area)2/2.5 3/3.5 4/4.5 5Gross rent 0.9% 0.2% -0.3% 0.6%Value 1.1% 2.5% 2.6% 8.7%Vacancy -4.1% -4.7% -6.7% -5.7%Incentives 5.8% 2.4% 2.1% 0.2%Yield 0.00% -0.04% -0.05% -0.15%Outgoings 5.3% 1.7% -2.7% -6.5%* green premiums given are relative to the benchmark non-green office buildings‘Building Better Returns’27