Crunch puts green back on agenda

GREEN IS BACK: The BNZ building in Waterloo Quay which won a five-star green rating for its design and construction.

After a period of cost-cutting, green buildings issues are back on the agenda in the office market, according to a survey of 300 tenants in Wellington, Auckland and Australian cities.

The biannual survey by ACA research for Colliers International asked tenants  about their expectations of future trends in the office property market. 

It showed organisations were again becoming more concerned about occupying green buildings, Colliers research director Alan McMahon said.

"Green building issues have been on corporate and government organisations' radars for some time, but in many cases these concerns were put to the side following onset of the financial crisis.

"Now that the impacts of the economic downturn, as well as seismic strengthening requirements, are becoming clearer in Wellington, office tenants are putting property sustainability back on the agenda."

Colliers executive director Jim Pinson said it was a surprising development.

"Green building issues had not been a prominent topic of conversation for tenants since before the global financial crisis. But the survey clearly shows that the importance of sustainability hasn’t waned, which contradicts some anecdotal evidence from the Wellington office market."

Corporate social responsibility and operational cost savings were key drivers in the push for green offices. Forty per cent of New Zealand respondents identified social responsibility as a factor. Two years ago it was just 28 per cent.

Organisations wanted their customers to see them putting high importance on sustainability and environmental responsibility, "Fifty-two per cent of Wellington office tenants – the highest proportion of all New Zealand and Australian cities surveyed – cited corporate social responsibility as a factor driving their decision to occupy green buildings, compared with 34 per cent  of Auckland tenants."

Operational cost savings were cited by 37 per cent of New Zealand respondents as a reason to occupy green buildings this year, up from 25 per cent in 2010. 

"While rent levels are often higher for green buildings, as these almost always fall into the premium or A grade quality category, there are often significant operational cost savings to occupants of green buildings owing to modern and energy-efficient climate control, lighting and other services," McMahon said.

The survey also reported staff productivity and wellbeing were more important to office tenants in Wellington and Auckland in 2012 than they were in 2010. ‘‘People want to work in a central location with easy accessibility. And a great location leads to happier staff.”

Sixty-three per cent of New Zealand tenants stated that building selection was important in staff acquisition and retention, a big jump from the 43 per cent recorded in 2010, he said.

Wellington tenants rated the importance of building selection higher than all others in Australasia this year.

Indoor air quality and a high level of natural light were also  top considerations for tenants.Organisations also wanted office space that supported changing work styles,  team development and collaboration. 

Sixty-five per cent of organisations throughout New Zealand and Australia indicated that their office leasing decisions had been impacted by global economic factors this year, compared with 23 per cent  in 2010,  McMahon said.

"The main effect of this outlook for New Zealand tenants is a requirement to cut costs and consolidate or contract their office space requirements. These issues were not as prominent in 2010."

Organisations were now more inclined to redesign their offices because it was cheaper than relocation.

However, Wellington tenants bucked this trend, with 24 per cent planning to relocate in the next three years, the highest percentage in  Australasia. 

Eighteen per cent of Auckland tenants surveyed this year planned to relocate.

Despite a requirement to cut costs, the vast majority of organisations did not plan to reduce staff this year,  he said.

Pinson said the survey found that the vast majority of tenants expected lease incentives  such as rent-free periods or subsidised interior fit-outs, although landlords were looking to tighten up on their availability.

"Forty-one per cent of Wellington landlords expect incentives to decrease this year, but only 4 per cent of tenants think incentive levels will decline.

"It’s a similar picture in Auckland, where 60 per cent of landlords expect incentives to decrease, compared with only 12 per cent of tenants.

"This shows there is a very wide gulf between landlords’ and tenants’ expectations of upcoming market conditions.”