As large owners of commercial property in South Africa, the SA REIT (Real Estate Investment Trust) sector has a central role to play in furthering good green building business in the country. This is according to the Green Building Council of South Africa (GBCSA), which emphasises that green building isn’t only good for the environment, but good for business and the financial performance of property assets too.
Last year, in the US, buildings consumed 39% of the total primary energy generated in the country, ahead of transportation at 28% and industry at 32%. Brian Wilkinson, CEO of the GBCSA, comments: “These shows the massive impact buildings have on our environment and the potential for extraordinary energy- and cost-savings that property investment companies have.”
Wilkinson explains: “Energy-efficiency, which is an intrinsic part of green building, has multiple benefits. Besides buildings consuming fewer resources, it helps minimise utilities bills for tenants, and green buildings are proven to provide better returns for owners.”
The first ever IPD South Africa Annual Green Property Indicators – released last month as a collaboration with GBCSA, provided proof that energy-efficient buildings offer higher returns for their owners. The benchmark return for green buildings was 15,9% vs the 14,2% for the overall sector. This makes them better investments, and means that energy-efficient buildings also benefit REIT investors. Energy and water savings over the long-term also mean lower costs, which frees up more financial resources for building operations and maintenance, securing the performance and investor-appeal of assets for the long-term.
Moreover, as listed investments that strive for good governance, the GBCSA’s Green Star SA ratings provide Real Estate Investment Trusts with a recognised, externally verified stamp of approval for a company’s green building achievements.
The good news is that many of South Africa’s REITs are not only taking notice of the benefits of resource-efficient building, but also taking action to ensure their buildings – new and long-standing – reduce their environmental impacts.
Wilkinson notes the commitment of SA REITs to energy-efficient green building varies widely – from world-leading contributions on one hand, to complete disregard on the other.
In the REIT sector, green business is clearly being led by the larger listed companies like Growthpoint Properties, points out Wilkinson.
Growthpoint is a founder of the green building movement in South Africa and is a member of the Green Building Leader Network – and exclusive network of select members committed to supporting green building. Growthpoint leads the way in green rated buildings in the SA REIT sector with seven GBCSA Green Star SA rated buildings and 10 registered projects to its name the Existing Building Performance GBCSA Green Star SA rating.
Wilkinson notes the benefits of green building increase exponentially with each building certified. “Simply put, the more green buildings a Real Estate Investment Trust owns, the more savings and benefits they achieve, and the lower their impact on the environments. The impacts are real and significant,” says Wilkinson.
The GBCSA’s achieved a landmark 50 Green Star SA certified buildings earlier this year. These buildings were designed to be about 48% more efficient at saving water, 34% more energy efficient and save more than 57% of greenhouse gas emissions. For the 50 buildings combined, this equates to saving 124 million litres of water each year, or enough drinking water for 34,000 homes a year, which equals enough drinking water for the entire South African population for one day.
It means saving 76 million kwh of energy each you, or the energy needed by 5,300 homes per year, or enough energy to boil 1.4 million kettles of water per day for a year. It measures a saving of 115 million kgCO2 a year, which is the same as 6,000 full Boeing flights from Joburg to Cape Town or taking 28,000 cars off the road per annum.
Wilkinson notes that with Growthpoint’s seven Green Star SA projects, it alone could potentially be achieving 20% of these savings.
However, he points out that, at the other extreme, there are companies that only pay lip service to greening and, some don’t even bother with that. “But, they do so at their own peril, and that of their investors.”
Wilkinson notes that business benefits are driving green building trends world-wide, both for new developments and retrofits. Because of this, strong growth is expected for green building, according to the McGraw Hill Construction World Green Building Trends Report. It states: “around the world, green building is accelerating as it becomes viewed as a long-term business opportunity.” And, Wilkinson points out, property investment is a long-term game.
The report notes that foremost among triggers driving future green building internationally are client demand and market demand.
Wilkinson puts this in context for the local market, saying: “It is the strategy of many REITs to attract and retain quality tenants. It is these exact tenants, particularly blue-chips and multinationals, that require green buildings for their environmentally-responsible business models.”
Leading businesses around the world have certainly seen the benefit of operating in green buildings. The same report notes that improved health and productivity benefits are driving green building more today compared to three years ago. “Some 55% of firms rate greater health and well-being as the top social reasons for building green. This belief is increasing. In 2009, 29% of companies listed this as a reason.
In South Africa, the leading trigger for green building is doing the right thing. This is followed by lowering operating costs, which is becoming increasingly pressing in the local market with endlessly soaring electricity costs. The third highest trigger is ensuring a positive public image. Local social and environmental reasons for green building are topped by greater health and well-being, followed by conserving our natural resources. Interesting to note, South African firms have a much higher than average expectation of the long-term operating-cost savings from green building investments.
Wilkinson concedes that the move to green building isn’t always simple. A lack of political support and incentives was also widely reported as constraining green growth in SA.
Despite this, Wilkinson points out that South Africa is making big strides in green building.
The report notes that green building is rapidly taking hold in South Africa, with its share of firms that are highly dedicated to green building growing at a faster rate than in any other part of the world. It notes that, overall 16% of South African firms reported heavy levels of green in 2012, an eightfold increase in just three years. Moreover, this was expected to triple by 2015, and this is anticipated to be concentrated in commercial buildings, both new and existing.
“As almost all SA REITs own portfolios made up exclusively of commercial property assets, they are set to have an important role to play in the future of green leadership in South Africa,” concludes Wilkinson.
Last month, Mark Stevens, SA REIT Association Marketing Committee Chairman observed that Real Estate Investment Trusts had the potential to achieve high returns and low risks in an investment.