Retrofit : Retrofit Volume 1 2012
74 • RETROFIT AUSTRALIA • VOLUME 1 NUMBER 1 2012 | Finance and Funding Timely boost for property community EUAs are a timely boost for the property community, which is dealing with high and volatile electricity and energy costs, and a growing proportion of ageing commercial building stock. As an indication of its central position within a building’s cost structure, electricity contributes 20 per cent of the costs for office buildings in Sydney1. The commercial property sector consumes around one-fifth of Australia’s total electricity use and generates 13 per cent of total greenhouse gas emissions. Meanwhile, experts predict a doubling in the price of electricity between 2011 and 20172. These concerns, coupled with estimates of 81 per cent of Australia’s 21 million square metres of commercial stock being older than 10 years3, provide an almost ideal backdrop for EUAs to play a vital role in the years ahead in enabling owners to ‘futureproof’ their buildings. EUAs also help owners keep buildings competitive to investors and tenants through improved energy efficiency, waste reduction and indoor air quality, with research4 indicating that tenants value green buildings as desirable places to work. Retrofitting makes sense The high energy consumption of older commercial buildings, which were never designed for optimal energy efficiency, means retrofits make good sense. A typical building can realise significant energy savings by retrofitting with up-to- 1 BENCHMARKS 2010: OFFICE BUILDINGS, PROPERTY COUNCIL OF AUSTRALIA 2 POWERING AUSTRALIA CONFERENCE 3 DAVIS LANGDON RESEARCH, 2009 4 GE CAPITAL RESEARCH, 2010 AND BUILDING BETTER RETURNS, UNIVERSITY OF WESTERN SYDNEY AND UNIVERSITY OF MAASTRICHT date technologies and systems and optimising their operations. Building retrofit projects also benefits local communities by creating jobs, as well as extending the useful life of each building within its local fabric. In its recent findings, the World Economic Forum announced projections of growing demand for retrofitting: ‘It is rare when a pressing environmental need makes demands on businesses that, rather than costing money, actually save them money and enhance their profitability. Retrofitting large buildings for maximum energy efficiency is such a circumstance. The opportunity to catalyse a building retrofit market holds tremendous value for business and government alike.’ 5 Retrofitting for a win-win-win EUAs are underpinned by a voluntary three-way agreement involving a building owner, a finance provider and council. The owner agrees to carry out the environmental upgrade works. The finance provider agrees to advance the funds for the works. Meanwhile, the participating council levies the environmental upgrade charges to pass repayments on to the finance provider (minus their processing fees). The agreements enable owners to carry out environmental improvement works that will deliver the best outcomes and value for their buildings on a case-by-case basis. The elegant simplicity of the EUA program is that each participant benefits markedly whilst contributing to better long-term environmental performance and reduced costs. 5 WORLD ECONOMIC FORUM ‘A PROFITABLE AND RESOURCE EFFICIENT FUTURE: CATALYSING RETROFIT FINANCE AND INVESTING IN COMMERCIAL REAL ESTATE, OCTOBER 2011 Building owners are able to access funding for retrofits at a competitive rate, over a longer term and for larger projects, which they can service through tenant co-contributions. Their sustainable buildings have less impact on the environment, and generate better returns. Tenants are able to enjoy the benefits of an upgraded, more efficient building at no extra cost. For finance providers, EUAs represent taking a leadership position with a pioneering offer that promotes greater investment in retrofitting ageing stock. Because the Agreements allow for the finance to be repaid through a council charge, like rates, they provide long-term security for loan repayments.
Retrofit Volume 1 Issue 2 2012