Our research has shown that sustainable refurbishment produces a return of better than 10% on investment. A study, titled Existing Buildings Survival Strategies: Making It Happen, guides building owners through a step-by-step process for assessing building assets, setting appropriate targets and identifying key upgrade initiatives to make sure they are making sound investment decisions. The results suggest that sustainable refurbishment of commercial property not only provides increased asset value and cash flow, but will soon be essential for maintaining occupancy rates and avoiding obsolescence.

The Study
Three generic building types – a 20,000m2 CBD tower, a 15,000m2 city-fringe high-rise and a 2,800m2 suburban office, all built in the 1980s – were considered not only for environmental performance but also as initiatives to provide rental uplift and reduced vacancies.

Four levels of upgrade were assessed:

Level 1
Re-commissioning, temperature set point adjustments, energy monitoring

Level 2
Replacement of chillers, variable speed drives, high efficiency motors, internal blinds

Level 3
Replacement of all major plant and equipment, chilled beams, high-performance glazing, roof and wall insulation

Level 4
Complete refurbishment

The Drivers
Existing buildings are, now more than ever, faced with an escalated rate of obsolescence. The introduction of Mandatory Disclosure of Energy Efficiency, more stringent BCA energy efficiency requirements and the proposed ‘Access to Premises’ standard under the Disability Discrimination Act incorporated into the BCA are placing greater pressure on existing building owners to improve their assets to remain compliant and avoid diminished cash flow.

There is an ever-growing demand by building tenants for sustainability and the lack of new supply will make existing buildings even more attractive. To attract and maintain long-term tenants, building owners need to provide office space with excellent environmental credentials.

Colliers International performed a detailed valuation of the CBD tower case to show how different levels of upgrade would change its market value. The findings indicate an increase in market value in excess of 10% is achievable and that the return on investment for green existing buildings was unquestionable. In addition, the owner ends up with a regenerated asset that attracts higher rents, lower vacancies and reduced utility outgoings.