Net zero carbon – the secret formula for net value gains

Plenty of people promise the secret to real estate success and investment portfolio optimisation, but I’m here to tell you the open secret most blogs don’t focus on.
Net zero carbon.

It’s often presented in the media as an expensive promotion that involves imposing limitations on our lives and activities. Our experience in working with clients to deliver net zero assets at scale is this simply is not true.

These net zero properties and projects include: Central Barangaroo in Sydney; Burwood Brickworks in Melbourne; Montreal Commons in Fremantle; Shoreline Town centre in Queensland; M_Park in Sydney; the Curtin University Masterplan; and the Sustainable Buildings Research Centre. All of these Cundall projects demonstrate low-impact, high-performance spaces and places that result in improved experiences and amenity for people who live or work there.

They also have lower operational costs for energy and water and, according to recent research by Knight Frank , are likely to have a market value of between 8-18% higher than business-as-usual assets with no green rating.

This point about asset value is an important one, as it casts doubt on the common property market perception that a split incentive makes asset owners reluctant to invest in sustainability. Popular wisdom says that the owner invests capex to deliver a better building and it’s the tenant or occupant that reaps the gains in terms of lower opex for tenancy energy and water costs.

But if the value of the building has been improved, and this is now demonstrably true, then the conventional argument disappears in a puff of (carbon) smoke.

A similar capex-opex dilemma has applied to developments where the proponent plans to on-sell the asset as quickly as possible.

Because features such as solar PV, mixed-mode ventilation, low-VOC finishes, low-embodied carbon materials – and processes such as attaining a formal third-party rating such as Green Star can front load the project in terms of design and documentation costs, while delivering no perceived added return for the developer – sustainability has often been considered a “nice to have” rather than a fundamental must.

For this reason, the pioneers of high-performance buildings have often been developers who plan to retain and operate the asset for the long-term. These developers include universities, retail shopping centre portfolios, REIT portfolio office towers, government buildings and build-to-rent residential developments. For these owners, spending on capex does have a direct benefit in terms of reduced opex costs, along with happier, healthier occupants who tend to stick around with the organisation.

There is now another factor coming into play that significantly shifts the game for everyone – science-based state, national and global targets for achieving net zero carbon emissions.

Action on climate change and global warming is no longer a luxury – it’s an imperative, something Cundall recognised when we embarked on the process of becoming the World’s First Certified Carbon Neutral Consultancy.

So, every building and every precinct has a part to play in getting there.

Now THIS is a plan.

Our process for achieving net zero emissions buildings sits across both capex and opex. Our approach is as functional as it is simple. We commence by mapping out the pathway and ensuring the building or precinct design will address all the client and community’s functional requirements. We build in the passive design features that will be either operate as cost-free or very low-cost.

One of the most energy-hungry processes in a building is HVAC, so we think about different HVAC strategies for different building areas. At the Burwood Brickworks retail project, perimeter tenancies are designed with natural ventilation, and the central mall is mixed-mode ventilated with operable sawtooth windows. These windows allow for natural ventilation when weather conditions are suitable. The tenancies are connected to a central thermal network which allows for regulating temperature control in each tenancy.

Utilising natural daylight and natural ventilation helps to reduce reliance on artificial lighting and mechanical systems. This not only forms part of the energy efficiency and Greenhouse Gas emissions reduction strategy, but we have found people appear to have responded well to the indoor experience of spaces like Brickworks. People appreciate natural light, fresh air and thermal comfort – which sounds like a no-brainer. But it wasn’t all that long ago that buildings were designed for all things artificial/mechanical in the way of lighting, indoor air ventilation and thermal comfort.

We also consider the future, and the kind of impacts climate change and the associated natural phenomenon including extreme heat periods and more intense storms might have. Our climate change adaptation planning and design response is relevant to both the operational efficiency and the environmental exposure of the building and its occupants.

This incorporates planning for the worst-case scenarios whilst undertaking complex modelling that ensures we maximise opportunities for water capture and reuse. Modelling also informs designs for drainage systems and landscape elements to control storm events and rainfall flows, effective shading to the building and public open spaces, roofing material with low SRI as a heat mitigation strategy as well as the building fabric efficiency strategy.

So, once we get the building fabric and the energy efficiency right – we can create renewable energy systems fit for purpose that reduce grid energy consumption and smash energy bills. This includes conventional roof areas but also innovative and valuable opportunities such as solar PV canopies for carparks. This results in a win-win: greater shading comfort for visitors and staff, whilst readying the car park for EV charging install.

When all these things have been done, there is one final step to get to net zero: the purchasing of carbon offsets to balance any unavoidable emissions during construction and ongoing operation.

Living Building Challenge certification requires capex to be invested appropriately at design and construction stage to make the building ultra-efficient and net zero for energy and net zero for water. It also expects the opex required for actual emissions offsetting procured annually (to retain Carbon Neutral certification), to be comparatively small.

So, here’s the silver lining. If carbon offsets with high ESG values that contribute to important initiatives like biodiversity restoration or economic wellbeing for Aboriginal communities are procured, there is a major reputational boost. One that adds purposeful value in the eyes of customers and stakeholders.