The spotlight is well and truly on retro & refurb as Australia is poised to reduce energy emissions, operational costs and get smarter with space. But why is it so important now? How can technology help? Where do we keep making mistakes? And what can be done to make sure our older buildings stand out? We sought the expert’s insight from Caimin McCabe, Director, Cundall Australia ahead of his presentation at Retrfit & Refurb 2014
What would you say are the key drivers prompting property owners and investors to start thinking about retrofitting their own buildings?
There are a few key areas here:
- In the building owner’s mind is asset repositioning or increasing asset value. They want to create a better asset and establish a point of difference from the competition.
- The asset valuation might be done as a direct result of current operational costs to try and reduce the running costs of those buildings.
- Retention is an increasing driver for retrofitting. Particularly in Grade B, C and D buildings where there’s a lot more competition for tenants. When their leases come up for renewal, they start to reflect upon whether they want to stay or if they’ll get a better deal elsewhere.
- Flexibility is another area we’re seeing as a driver. There are increasing numbers of smaller entities who want smaller space in good locations, leading to a need to accommodate multiple (small) tenancies on each floor – particularly within Grade B, C & D buildings.
- In the back of people’s mind whilst doing this are issues like NABERS Energy performance to see if it can be improved.
How are technologies and new approaches being used to improve environmental and operational performance of existing buildings?
I’d say the best bang for buck is actually looking at control upgrades and getting the building management system to actually do what it should be doing. Look at sub-metering to actually monitor where energy is being used; target reduction rather than assumptions.
The market is obviously seeing a lot of new technologies emerge, as well as enhancements to existing buildings including classic co-generation and tri-generation. In reality though, existing buildings can often find this difficult to accommodate as they don’t tend to have plant rooms available…
What’s quite important to us is it’s not just doing it for the environmental sake; the economics of decision making is equally important. Greater equipment efficiency and operation need to be considered..
Engaging the ‘right’ technical advisor or engineer to work alongside building or facility management in terms of the operational tuning is also key. The trick is to ensure this happens on an on-going basis in lieu of a one-off assessment.
We’re also seeing consultants and facility managers use big data analytics software to assess controls and trend log profiles in real-time to identify ‘rogue’ systems and control issues.
We’ve also found (and this is probably part of the whole-of-life approach) that there’s a tendency to ignore the façade. We’ve had some really good success on buildings where we’ve taken a step back and looked at the building as a whole and said: ‘Rather than just going in there and doing the engineering, we’ll check the whole façade.
We recently took this approach in a project that was focused on the chiller, in which we made many changes to the façade. This resulted in no need for a replacement chiller.
We re-commissioned and put in some new technology components, like diffusers to improve the air quality – we moved the pot of money around. In the end we got the building from its one star NABERS to a four star NABERS. We also significantly improved the indoor environmental quality of the building, so now the building is actually liked, not hated.
You might have an efficient building, but if you don’t want to work there, it doesn’t really matter.
Property owners of B, C and D grade buildings are under pressure to evaluate cost benefits. What are the key areas that need to be addressed during business case development to ensure ROI?
The interesting thing is, embarrassingly to some of the newer buildings, some of the older buildings actually have better performance. Just because they’re old doesn’t mean they’re bad. There is a trend in industry generally that new is good and actually sometimes old is better.
A lot of the old buildings are designed more with passive design in mind. The level of glazing, for example, in an existing building is generally a lot lower than on a new building. Our own office here has only 25 per cent glass, but we’ve got more daylight in our office than we would have if we were actually in a new building. This is because of how it’s introduced and how it’s used. The are a lot of advantages to those buildings which are not traditionally marketed or sold, which is why I talk about the whole building approach. It’s stepping back and asking: ‘What are the attributes? What are the benefits? How do I enhance them and connect the tenant to those benefits relative to other buildings?’
It’s important to realise there’s no silver bullet – if somebody’s trying to tell you that there is, don’t believe them. Every building is unique – there isn’t one size fits all. You have to judge each building on its own in terms of what’s there, but the approach needs to reflect the energy efficiency, indoor environmental quality and the attributes that the building actually has.
Depending on the asset location and target market, the argument isn’t about ROI, but more towards differentiation from competing Grade B, C & D buildings.
Building owners are typically looking only at rent; they’re not considering the quality of the environment they’re in. That’s where I suppose our role is, along with other colleagues, to try and highlight what the building could be for them.
The real risk is what happens if the landlord decides on doing nothing. The danger for the landlord is that they are then left with looking at costly incentives for tenant’s attraction or attention. They’ve potentially got higher vacancy and operating costs weighing down the asset value. They could even be breaching bank covenants as they’re not actually getting the returns. In our mind, doing nothing for an asset owner of a B, C or D grade building in the marketplace is not really an option any more – they just need to sit back and determine how they want to do this and how to reposition the asset.
A major retrofitting and refurbishment project will encounter many challenges across the design and delivery phases. From your experience, what would you say are the main barriers that prevent people from achieving their aspirations on a re-lifting project?
A few areas here also:
- Existing site or services infrastructure might not be sufficient to achieve required outcomes – there could be limitations inherent within the building.
- Working around existing tenants can also be problematic and might limit the extent or timing of works that can be done to retain a ‘live’ building.
- Availability of financing will always be an issue. There’s also a lack of understanding on the alternative funding mechanisms, such as an Environmental Upgrades Agreement (EUA).
- The return on investment could also be perceived to be too low to actually do the work. In terms of guaranteeing better rents, it’s impossible to do that. We find there’s a tendency to jump in legs first without spending enough time doing the upfront assessment and design stated. When you start to do the actual work, you expose issues you weren’t aware of because the due diligence wasn’t done at the beginning. This in turn might result in costly mistakes (affecting overall budget) and subsequent cut backs or reduction in scope as part of a value engineering response.