Build Or Refurb? - Business Media MAGS

Business Day Commercial Property

Build Or Refurb?

In the push for greener buildings, increasingly property owners are also refurbishing existing assets to attract new investment, writes Helen Grange.

Commercial building developers are pursuing the highest green building standards — applied to new building developments or in the refurbishment of existing buildings — as it makes sound economic sense in terms of running costs and improved asset values.

“Reduced operating costs, improved indoor environmental quality and improved environmental, social and governance (ESG) performance, as well as investment and compliance criteria, are some of the drivers behind the decision to refurbish existing buildings to a certified green standard,” says Grahame Cruickshanks, managing executive for market engagement at the Green Building Council South Africa (GBCSA).

GBCSA has refurbished its offices in Rosebank Corner on Jan Smuts Avenue, Johannesburg, and in The Old Warehouse Building in Observatory, Cape Town. Both were existing buildings now certified to a Green Star Existing Building Performance (EBP) standard.

“In both cases, there are large solar PV installations on the roof. The energy- and water-efficiency installations have led to better quality assets for the buildings’ owner, Redefine Properties,”
says Cruickshanks.

Very efficient buildings can cost-effectively supplement their energy and water needs with renewable energy and recycled water technologies. “Rooftop solar PV systems are popular additions to existing buildings. This is due to the improving efficiencies being achieved in the available technologies, and the rapidly rising cost of grid-supplied electricity. The investment case for solar PV is extremely attractive for buildings with the appropriate roof space,” he adds.

Water investment case

Water pricing in South Africa has made the investment case for greywater, blackwater, and rainwater harvesting less appealing to building owners. “Still, in some cases, building owners are choosing to futureproof their assets against higher water utility pricing and supply interruptions by ensuring that greywater recycling and rainwater harvesting systems are retrofitted to their buildings,” says Cruickshanks.

Market returns on certified green buildings — new or existing — are consistently better than those of noncertified green buildings, according to research by the MSCI Real Estate and Green Property Index (MSCI). It shows the total return on Green Star-certified P&A-grade commercial office buildings was 10.3 per cent over the three years 2016–2018, as opposed to 7.2 per cent for noncertified offices of the same grade.

“The improved returns from green buildings is significant, and improved capital growth in certified buildings certainly indicates that resale values will be positively impacted by energy- and water-efficiency measures, as well as the saleability of  those properties with green features,” says Cruickshank.

One of the most notable developers of green buildings is Growthpoint Properties, which last year increased its minimum target for green building certification in its office buildings from a 4-Star to a 5-Star Green Star rating.

New versus refurbished

New developments, in the main, are quite different from refurbishments, in that they are often larger and require more planning. “Part of our approach is to develop green buildings using international sustainable best practices, which ensures an optimal environment for the occupants and a building that operates efficiently, sustainably and with minimal impact on the environment,” says Growthpoint Properties head of asset management for offices Paul Kollenberg.

With refurbishment or redevelopment, the goal is to give a property asset a new life and a new base to grow its earnings potential. “Refurbished redevelopments tap into the benefits of existing infrastructure, often taking less time to complete than new developments,” says Kollenberg. “They also present the ideal opportunity to introduce efficiencies, which optimise the results of the project and extend a building’s lifespan.”

Image: Old Warehouse

You might be interested in these articles?

You might be interested in these articles?

Sign-up and receive the Business Media MAGS newsletter OR SA Mining newsletter straight to your inbox.