We recently sat down to talk with Bronwyn Shirley, the Assistant Director of Australia's Commercial Building Disclosure Program. Shirley works at the Department of Climate Change and Energy Efficiency implementing this exemplary policy.
DL: What is the goal of the CBD regulation?
BS: Commercial Building Disclosure (CBD) is a national program designed to improve the energy efficiency of Australia’s large office buildings. A building owner or lessor of office space of 2,000 square metres or more is required to disclose a Building Energy Efficiency Certificate (BEEC) for the building prior to lease or sale. The BEEC comprises: a National Australian Built Environment Rating System (NABERS) Energy star rating for the building; an assessment of tenancy lighting in the area of the building that is being sold or leased; and general energy efficiency guidance.
The disclosure of energy performance is designed to overcome the market barrier of undersupply of information to prospective purchasers, and the issue of split incentives (principal-agent problems) for commercial office tenants. Disclosing energy efficiency facilitates market access to clear and credible information about a building’s energy performance. This allows companies to make more informed decisions about the energy efficiency of the office space they buy or rent, which in turn creates a market-based incentive for owners to improve their properties with cost-effective energy efficient upgrades.
DL: What do Australian building owners stand to gain from this regulation?
BS: High performing commercial buildings are already showing improved returns in the commercial building sector in Australia. The recent Property Council of Australia/Investment Property Databank Green Index report found that commercial office assets with high NABERS Energy ratings have lower cap ex rates, capital growth stability and outperformance in investment returns. In addition, a study of the financial performance of green office buildings in Australia by the University of Western Sydney (‘Building Better Returns’) found that a 5-star NABERS Energy rating delivered a 9% green premium in value and the 3-4.5 star NABERS energy ratings delivered a 2-3% premium in value over non-rated buildings.
DL: How many buildings nationwide are NABERS-rated? How many office buildings have benchmarked since CBD began?
BS: There are currently 1132 NABERS Energy (base and whole building) rated offices across Australia, 791 (or 70%) of which are due to CBD. Since the introduction of full disclosure in November 2011, approximately 1,200 more have been issued, covering more than 7 million square meters (approximately 75 million square feet) of office space.
DL: How are you monitoring compliance with CBD?
BS: Compliance is being monitored through a range of activities including: analysis of information gathered from advertisements for sale, lease or sublease; analysis of and cross reference with information from other sources, such as state title records; desk top auditing of assessments; and targeted onsite audits using appointed auditors.
DL: Will you track environmental, economic, or energy efficiency investment impacts of CBD? Do you have projections for these?
BS: The Department formally reviews CBD statistical information in 6 monthly increments, looking at many aspects of certified offices including energy consumption, area and geographical spread. In particular the Department looks at buildings that have been issued multiple BEECs and the improvement in efficiency between the first and subsequent BEECs. Since the introduction of CBD 122 buildings have applied for more than one BEEC, with an average improvement of 0.2 of a star (or 4%) recorded overall. The maximum improvement recorded has been 2.5 stars. The Department is currently in the process of reviewing phase one of the program and the results after the first year of full mandatory disclosure.
At this early stage of the program the Department does not have the capability or available data over time to produce projections. However, the Department is working on developing a methodology that will allow this functionality in the future.
DL: What do you see as the next step for building energy efficiency policy in Australia? In the global real estate market?
BS: The Australian Government is exploring policy options in alignment with the International Energy Agency and the National Strategy on Energy Efficiency. It sees the corner stones of future policy as continuing to increase the stringency of minimum performance requirements for new buildings and renovations through the National Construction Code, and examining other building types which may be suitable for a mandatory disclosure program such as CBD.