BuildingRating

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What Explains the Success of NABERS?

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Australia’s Commercial Building Disclosure (CBD) program has now been fully implemented for over a year, and about 66 percent of Australian office space has an energy rating.  Under the program, sellers or lessors of office space greater than 2,000 square meters (approximately 22,000 square feet) are required to disclose a Building Energy Efficiency Certificate (BEEC) if the space is being sold, leased, or sub-leased. 

The cornerstone of a BEEC is a NABERS Energy star rating. NABERS Energy is a rating tool for existing commercial office buildings, shopping centers, hotels, and homes that measures actual operational performance. A building or tenancy’s score on the rating scale of one to six stars lets a building owner or manager track the energy performance from year to year as well as the energy performance compared to other similar buildings.

Until the CBD program went into effect, NABERS was a voluntary rating system. Nevertheless, in 2010, about 60 percent of Australian office net lettable area had been rated using NABERS Energy. Why was voluntary market uptake so high?  A new report by Paul Bannister of Exergy, “NABERS: Lessons from Twelve Years of Performance Based Ratings in Australia,” describes the factors that drove NABERS’ success, listed below:

  1. Ability to separately rate the base building, whole building, or tenancy. The ability to independently rate the base building from tenancies differentiates NABERS from rating systems like ENERGY STAR, which is used to rate whole buildings.  A tenancy rating is based on the energy that the tenant uses, while a base building rating measures the performance of a building’s common areas and central services. With the possibility to get a base building rating, building owners can track and disclose energy performance without considering tenant behavior or acquiring utility data from tenants.                                              
  2. Incorporation of NABERS Energy ratings into government leasing policies. Most Australian state governments, starting with New South Wales in 2002, and the federal government, cite minimum NABERS Energy rating requirements for government leases. With approximately 40 percent of Australian office space leased by either state or federal government agencies, these requirements motivated large building owners to improve and maintain energy performance so that they could remain competitive in the market.                                                                           
  3. Industry practices. Large real estate companies and property funds have for the most part pushed corporate sustainability and set strong environmental targets. Most of the rated building area is in large buildings.

With these factors, energy efficiency has become a core business value in the Australian property market. Large property owners see energy efficiency improvements and NABERS Energy ratings as necessary to keep abreast with their peers.  Evidence of this can be seen in the increase of the average NABERS rating of the portfolios of major property holders over the past few years and in the addition of a sixth star to the NABERS rating scale, which initially set five stars as the maximum rating.  The change was made because a significant sector of the market had already reached 5 stars, originally considered the aspirational limit.

The success of NABERS provides insights for other rating schemes worldwide. It has demonstrated that performance benchmarks are valuable and can drive market transformation. It has also shown the role that government can play as a supporting actor. Read Bannister’s report (linked above or in the Document Library) for more details on the NABERS scheme.