Green building tenants urged to be cautious of certification projections

10 May 2011

Environmentally-minded business tenants wanting to rent “green” buildings in Australia and New Zealand often have insufficient information to know they are getting what they want, an Auckland academic warns.

University of Auckland Business School PhD student Jeremy Gabe says companies wanting a ”green” public profile regularly have inferior information available to them to judge the “greenness” of a building, because Green Star certification only articulates the building’s potential and not its reality.

He says the problem could soon begin to encroach on the relationship between building owners and tenants, as performance-based tools continue to be unavailable for analysing “green” building performance.

And, with up to one-third of American “green” buildings not measuring up to their advertised potential, Mr Gabe is urging the adoption of local performance-based strategies to ensure environmentally-minded tenants get what they think they are paying for.

“In an extreme scenario – and based on North America’s LEED (Leadership in Energy and Environmental Design) certification – Australia and New Zealand could be looking at the same statistics as the United States, because both countries’ Green Star certifications have similarly precise thresholds for awarding energy efficiency points,” he says.

In a working paper on the problem, Mr Gabe says a proportion of certified “green” buildings across the two countries could be “misrepresented in the market.” If the US study is representative, one in five may be certified at a higher level than they actually perform. At the same time, one in ten could perform better than their certification attests.

“The discrepancy is only based on the relationship between potential energy consumption - a key component of ‘green’ building certification - and actual consumption in-use,” Mr Gabe says.

“One key component of ‘green’ building certification – potential operational energy efficiency – is difficult to predict before occupancy, but my research shows that only 15% of buildings perform within the range of energy savings predicted by those energy efficiency credits,” Mr Gabe says.

The data show an equal split between buildings that exceed their potential and those that fall short.

“This could result in decreasing price premiums as tenants - who may place higher value on the intrinsic benefits ‘green’ buildings give their companies - become aware of uncertainty in the expected link between certification signals and performance,” he says.

Add the prospect for similar relationships with water efficiency potential - another aspect of “green” building certification - and the number of misrepresented buildings could grow higher, Mr Gabe says.

With some “green” building designers aiming for minimum requirements, any loss of credit means the building is prone to falling below its certification threshold.

“Neither New Zealand nor Australia has yet introduced an equivalent performance-based tool like LEED has with their Operations tool, though our neighbours across the Tasman have the National Australian Built Environment Rating System (NABERS) which can be integrated with Green Star,” he says.

NABERS is now mandatory in Australia and could represent a model for what pro-active tenants could demand here in New Zealand, he says.

“Eliminating the conflict of interest between building owners and those who value building performance is one of a range of benefits likely to result from a change in certification process that involves a level of ongoing performance assessment,” Mr Gabe says.

Certified “green” buildings occupy a low proportion of the market for commercial building space in Australia and New Zealand, but the genre is growing. One third of firms in the global US$4.7 trillion construction market are largely to fully dedicated to “green” building, and Mr Gabe says investors, developers, owners and tenants appear more willing to pay for the benefits of "green" building certification.