Green Phenomenon Takes Hold in South Africa

Property Entering Green Era

Astute property developers, investors and entrepreneurs will no doubt already be aware of the next big era in the property, namely the profound impact that ‘green building’ practices are going to have on the industry in the foreseeable future. There are boundless business opportunities emerging as South Africa’s commercial property developers and investors join the bandwagon of what is fast-becoming a global phenomenon.

Building design is undergoing a transformation, moving away from work environments that are closed off from the outside world towards places of business designed to be at one with the natural surroundings. For instance, the power-draining air conditioners so often found in high-rise buildings and the shimmering glass towers that trap heat are set to become a thing of the past, as landlords and tenants demand real estate more reliant on renewable energy and reusable materials.

The recent IPD/Sapoa Property Investment Conference held in Cape Town recently focused primarily on the global trend towards constructing and refurbishing buildings along environmentally friendly lines. Delegates were informed that commercial property and the world’s airlines are two of the major contributors towards the production of dangerous carbon gas emissions destroying the earth’s ozone layer and as a result, contributing to the ever-looming global warming.

The South African real estate industry has only recently begun adopting green building standards, but the movement is expected to gain momentum. The Green Star Rating System is currently being introduced and although the ratings are not compulsory, pressure is anticipated to come from corporates, particularly those with international shareholders who want to be seen as socially and environmentally responsible.

According to the chairman of the Green Building Council of SA, Bruce Kerswill, “We in South Africa haven’t felt the sense of urgency on this yet. But we can expect to see stakeholder and government pressure here soon. South Africa has agreed to cut carbon emissions”. While some may not be inspired by the moral aspect, there is certainly a compelling business case for the greener option, with research showing that productivity can increase from about 5% to 15% with employees who work in a ‘green’ building.

Like all the healthier things in life, green buildings do tend to be on the expensive side when it comes to building and ultimately renting, however the cost is not quite as much as one might expect. For instance, in Australia a four-star building would cost the same as a non-green building in capital costs, while a five-star building requires more technology and would be around 5% extra in total cost. At 11% more for a six-star building, Kerswill believes this is “not a huge premium” to pay.

Buildings that promote the use of public transport rather than the use of private vehicles by being situated close to major transport nodes or because smaller cars get the best parking will earn more points than those that don’t. There is a huge emphasis on recycling and points are earned for sourcing local products rather than importing cheaper ones from elsewhere. There is another category that rewards “innovation” and this aims to “stimulate out of the box thinking” rather than simply adhering to the ratings.

Kerswill insists that this is not just a passing fad. Development director at Old Mutual Investment Group Property Investments, Brent Wilshire says that his organization has looked at their “top eight” buildings in a bid to identify areas to “make a difference”. He also produced some interesting figures indicating the extent to which these buildings ‘guzzle natural resources’. Just a 20% reduction in water use at these buildings alone would conserve enough water to fill 133 swimming pools every day.

“The important thing is you need to be able to measure then you can set targets,” Wiltshire says, highlighting the value of a green building rating system. “In our new assets, the green building principles are best practice. What is important is to get the right team in place. It’s about putting the philosophy in place upfront and making sure the team buys into it – it’s about an attitude”.

Managing director of IPD Occupiers and Management in the UK, Christopher Hedley indicates that corporate property will come under increased pressure and scrutiny for environmental performance and compliance. “Property investors face risks. Tenants will act and valuers will respond,” he says. He adds that as more green buildings come onto the market, they will start to get cheaper. “There is an increasing pressure to deliver. We have the need for accurate information. We’ve got to create monitoring and targets and need to be able to prove performance,” Hedley says.

The information in this article is courtesy of Jackie Cameron (“Making money in the new property era”, Realestateweb, 20 August 2008).

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