Commercial Property on Collision Course with Climate Change
Tuesday, 23 September 2008 19:54
Cameron Eren, of TEC’s Industry Partnership Program and author of the report said that climate change is creating “a perfect storm” for commercial property.
“On the one hand global warming will directly impact the sector through extreme weather events, rising sea levels, and inflated cost structures,” he said.
“On the other hand, climate policy will result in higher energy costs, rising tenant demand for energy efficient floor space, increased investor pressure, and the growing likelihood of further regulatory interventions.”
But the news for commercial property is not all bad. The report reveals that while commercial property is one of the sectors most clearly exposed to climate change it is also one of the sectors that is best placed to manage its climate related exposures.
“Commercial property has a strong interest in upgrading the energy efficiency of existing buildings. Energy efficiency upgrades will safeguard existing margins against rising costs and will ensure that individual buildings remain attractive to tenants,” Eren said.
“Emissions reduction projects also offer building owners above market rates of return that, despite their profitability, are eligible for subsidies. Reducing emissions from existing buildings is a risk management exercise that is ultimately profitable for the sector.”
The report Commercial Property & Climate Change- Exposures and Opportunities is part of the TEC’s ongoing work with the commercial property sector through the Existing Buildings Project.
The report explores what climate change means for the sector, what options the sector has to reduce its emissions, the rates of return offered by emissions reduction strategies, and lists all available subsidies for emissions reduction projects.
”The smart money has seen the writing on the wall and has already begun to manage its exposures,” Eren said. “In the short-term emissions reductions will offer these groups a competitive advantage. Over the medium term, emissions reductions will simply become a defensive strategy.”
Through the Existing Buildings Project, Macquarie Office Trust, GPT Group, Australian Prime Property Fund, and the Local Government and Superannuation Scheme have announced that they will upgrade their entire Australian office portfolios to achieve a NABERS Energy rating of 4.5 by 2012. Becton Property Group has announced that they will upgrade their portfolio to a NABERS Energy rating of 4.0 over the same period.
