Government property decisions are now influenced by NABERSNZ ratings – have you caught up?

27 Apr 2021

By Manoj Ediriweera

In late 2020, the Government announced a major step forward in its focus to reduce carbon emissions by 2050, with the introduction of a NABERSNZ minimum star ratings requirement on existing and new office tenancies for all mandated government agencies. As New Zealand’s largest tenant, owning and leasing more than 1.2 million sqm, it makes sense for the Government to look internally to achieve energy efficiency.

Therefore, if you want a government tenant, you’ll need to obtain a NABERSNZ rating for your building. As of 1 January 2021, new or renewing leases for all government agencies who occupy single-tenant, co-tenant or co-located government office space have compulsory standards to meet associated with these tenancies and all non-mandated agencies are encouraged to also comply. 

Though it should come as no surprise - since it has been discussed for a while - landlords who want to retain or attract government tenants must take steps to lower carbon emissions. Government tenants have been asked to target existing buildings with a minimum NABERSNZ rating of 4 stars and any new build must receive a minimum of 5-star NABERSNZ rating.

When NABERS ratings were introduced into Australia across all office buildings, it saw over $1 billion of energy savings, 7 million tonnes of CO2 emissions saved and 78% of Australia’s office space rated with NABERS. Though we don’t know what this will mean for the office leasing market in New Zealand, we would imagine that it will follow Australia’s NABERS lead and swiftly become mandatory to have a NABERS rating. With the increase in interest and demand, the New Zealand Green Building Council is working towards providing NABERSNZ ratings across other styles of buildings over and above office buildings in the near future.

The ripple effects of industry requirements has seen the likes of ANZ Bank taking the stance to only finance new office builds if they are 5-Star Rated or more for both Green Star and NABERSNZ – so the pressure is on throughout the industry to comply.

From a commercial sense, corporate tenants are becoming louder advocates for 5-Star Green Star builds, especially from the younger generation who are voicing their interest to work in a building that boasts good ratings. This is amplifying the discussion on wellbeing and good indoor air quality with the green workspace becoming an ‘attract and retain’ strategy for many organisations.

These discussions are attracting investors to high Green Star and NABERSNZ rated assets, with obvious benefits to the landlord and tenant when the commercial property is performing at this higher standard.

As an example, Argosy Property has embraced the changes that NZ Green Building Council is championing alongside NABERSNZ. They have seen first-hand the benefit of adding efficiency and the cost-effectiveness through their assets within their portfolio that meet these standards including:

  • Built Green-Star Ratings that evaluate what is built provide an uplift in rent per square metre; this reflects the quality of what has been built and the higher specification.
  • Argosy has measured a 20-30% drop in energy consumption in Te Puni Kōkiri (TPK) – Wellington’s first 5-Star Green Star Rated Office build (circa 6,000sqm) following a major refurbishment in 2013. This translates to circa. $80,000pa savings on energy costs.
  • Investigating whether solar energy will reduce the load for industrial buildings which can result in a smaller transformer size, which in turn can lead to lower loads and line rentals for the client.
  • A good NABERSNZ rating can be achieved if the property management teams are educated on how to balance sustainability and energy efficient management practices.
  • The NABERSNZ rating system is designed to be achieved when property management teams utilise good management practice in respect of their building services.

Sustainability plays a core role in how corporate real estate can be a conduit to change. In Australia our CBRE Sustainability team has years of experience completing NABERS ratings and is integral in helping landlords and tenants achieve ratings that are in line with requirements. Through this knowledge and in-depth involvement, we are perfectly poised to help the New Zealand market begin this journey. For more information on NABERSNZ ratings and how CBRE can assist you further, please contact me.

My next insight piece will review which buildings have NABERSNZ ratings within the three main office markets and the potential barriers as the Government looks to grow its office foot print within the regions.