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Executive Summary

The Ministry for the Environment commissioned this study to help central government organisations take practical action to reduce their impacts on the environment, economy and society. One obvious action is to fit-out government buildings to match current best practice for sustainability, and in response to this need the pilot of the New Zealand Green Building Council Green Star Fit Out rating tool was issued in December 2008. The tool defines more sustainable fit-outs based on a six-star scale.

This study investigates the value case for Green Star 4-, 5- and 6-star rated government office tenancy fit-outs. Formal accreditation of sustainable office fit-outs can be given only to the top half of the rating scale, including 4-, 5- and 6-star fit-outs. Accreditation should be possible by the middle of 2009, when the final tool will be released to the New Zealand market. A further optimised 4-star with energy focus rating, representing a 4-star rating with an enhanced score in the energy category, has also been investigated by this report.

Sustainable fit-outs can make a large environmental impact because they can be carried out on both new buildings (5 per cent of buildings) and existing buildings (the remaining 95 per cent). They provide the opportunity to improve the sustainability of the built environment from the inside out, and to overcome the barrier of how to upgrade the majority of existing buildings with life spans of 50 years or more within a relatively short period (10 years).

This value case recommends a minimum 4-star with energy focus Green Star office fit-out rating for 4-star Green Star rated office buildings and unrated office buildings. It also recommends a minimum 5-star office fit-out rating for 5-star office buildings. The following table summarises the costs and benefits of these recommended minimum standards.

Table 1: Cost–benefit analysis for recommended minimum Green Star fit-out standards

Base building rating Recommended tenancy fit-out rating Average cost premium
% 		Simple payback (years) 9-year
NPV
$/m²NLA 		IRR
%
Unrated 4-star with energy focus +2.6–3.6 2.7–3.4 30–38 30–38
4-star 4-star with energy focus +2.1–2.9 2.2–2.7 34–42 38–48
5-star 5-star +4.0–5.3 4.1–5.0 4–28 17–23

Notes:

Simple payback = the amount of time it will take to recover the initial cost premium, ignoring the time value of money, inflation and the life of the investment.

IRR (internal rate of return) = the discount rate with an NPV of 0 over a period of time.

NPV (net present value) = the stream of costs and benefits over a time period, converted into an equivalent value today.

NLA (net lettable area) = the area for which a tenant could be charged for occupancy under a lease.

Taking into account energy and water cost savings alone, these recommended minimum standards have a short payback period and a positive nine-year net present value (NPV) of approximately one to two times the original cost premium for a 4-star with energy focus rated fit-out, and approximately zero to one times for a 5-star rated fit-out. However, combining this with occupant health and productivity benefits to staff costs, the recommended minimum standards have a positive nine-year NPV approximately four to five times the original capital cost investment for a 4-star with energy focus rated fit-out, and approximately four times for a 5‑star rated fit-out.

Sustainable fit-out principles are closely associated with improvements in workplace efficiency and therefore workplace performance. These benefits and associated operating cost savings can also be substantial, but have not been factored into these value cases. Sustainable fit-outs also provide the opportunity to reinforce sustainable behaviour by the building owner or operator and the building occupants.

Given the costs of full Green Star accreditation, it would be advisable to limit accreditation to fit-outs greater than 2000 m². This cut-off is consistent with other limits on the application of government property guidelines. Sustainable fit-out features similar to those recommended by this report should still, however, be included as far as practicable.

The energy efficiency measures included in these minimum fit-out standards represent the easily achieved or ‘low-hanging fruit’ of carbon abatement. By adopting these minimum standards a 25 per cent reduction in current central government office accommodation energy use, greenhouse gas emissions and associated operating costs is possible. Given that office fit-outs typically have a life expectancy of six to nine years, this reduction could feasibly be achieved within 10 years.

The development of the Green Star Office – Interiors rating tool has been sponsored by 10 commercial/construction industry partners contributing over 80 per cent of the funding, and a contribution from the Ministry for the Environment of just over 15 per cent. These partnerships exemplify the public and private sector working together to promote sustainable development. In contrast to government regulation via the New Zealand Building Code, the New Zealand Green Building Council (NZGBC) Green Star rating system is voluntary and promotes significantly higher standards than the minimums prescribed by regulation.

Since the New Zealand Green Building Council released the first Green Star rating tool, Office Design (Version 1), in April 2007, the uptake of this rating tool has been a considerable success. Over 50 office building projects totalling over 400,000 m² in floor space have now registered to achieve a Green Star rating, and eight of these have already achieved certification. This represents around 40 to 50 per cent of all new building work currently underway and approximately 13 per cent of the total office space available in the three main centres.

 

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