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Five property trends for 2023 - and how they bring us closer to Paris

Retrofitting By Garrit Schot, Partner, Building Services – 15 December 2022

Woman holding a calendar with the text 2023 made up of grass


Garrit Schot with blurred street background

Garrit Schot

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Converging forces in the global economy and shifts in the Australian policy landscape point very clearly towards what stakeholders will be wanting multidisciplinary consultants to deliver in 2023. For a start, we have rising interest rates for finance in Australia coupled with whispers of a possible global recession. This put the spotlight on existing assets as the safe harbour for capex.

There are also the changes coming into effect around more stringent energy efficiency requirements in the National Construction Code; we expect a major boost to renewable energy rollout; we’ll find a stronger emphasis on local and circular economy supply chains; and the market is shifting to all-electric, net zero assets as business-as-usual.

Existing buildings will be the focus

While designing and delivering new buildings is exciting, with uncertainty around the cost of debt and the vast investment of capital required to procure sites and start a development process, refurbishments, upgrades and retrofits of existing buildings will be the smart strategy.

This also aligns with the findings of the Intergovernmental Panel on Climate Change (IPCC) that improving the energy efficiency of existing buildings is one of the fastest and most cost-effective methods of emissions reduction we can implement.

There are some other factors at play – the emerging requirements in rating tools including Green Star around accounting for embodied carbon, and post-pandemic shifts in tenant preference for smart, agile, flexible spaces with sound environmental credentials and excellent indoor air quality.

Energy efficiency

Energy bill costs have been headlines for some time now, and in 2023 we will see growing awareness that reducing demand is both beneficial for operational costs and critical as we decarbonise the grid.

The new iteration of the Australian National Construction Code (NCC 2022) increases the requirements for energy efficiency for both Class 1 and Class 2 (multi-residential) dwellings as well as enhancing the Section J provisions applying to most other building types. For major refurbishment or retrofit projects, the NCC 2022 standards and requirements will apply.

Smart building technology will be a key enabler that helps asset owners and asset managers meet the expectations of both the market and regulators.

This is not so much the full automated everything and app-driven coffee ordering vision, as it is the behind-the-scenes control systems and platforms that can make any building perform better. Where a building management system (BMS) is already incorporated into the building, retrofitting cloud-enabled building controls software with control logic elements can enhance the efficiency of existing equipment through real-time responsiveness to actual conditions and occupancy patterns.

For example, heating, ventilation and air conditioning (HVAC) systems can include smart BMS (Building Management System) controllers with predictive algorithms on parts of the system including Air Handling Units (AHUs) and central plant including chillers. The controllers enable units to ramp up or down depending on ambient conditions, occupancy patterns and other factors. This delivers a major energy efficiency dividend compared to standard set-and-forget set points approaches.

Smart building platforms - cloud-hosted software solutions - can utilise customised algorithms that combine energy performance benchmarks, exception reporting, and alerting. The platforms help occupants, asset managers and facilities managers understand how much energy and water building systems and individual tenancies, apartments or common areas should be using so that issues including water leaks, excessive energy use due to occupant behaviour (leaving lights on, for example) or equipment faults can be detected quickly, and action taken.

“Having on-site renewables is becoming standard for both new and existing buildings across almost every NCC asset class.”

Renewable energy

Having on-site renewables is becoming standard for both new and existing buildings across almost every NCC asset class. From retail centres with large-scale panel installations through to strata apartment towers and commercial towers, rooftop PV is reducing the reliance on mains energy use for common areas.

Smart building platforms enable asset managers, tenants, and owners to have real-time data on how much energy is being generated and when, which can be applied to fine-tune time of use to maximise the benefit of free electricity. It is also feasible to combine such systems with Bluetooth or cloud-hosted remote controls for switching equipment on and off to ensure energy-intensive equipment can be undertaken when on-site generation is at its peak – without someone having to physically switch on the units.

Where an energy storage battery or array of batteries is connected to the system, storage levels and overall performance can be seen in real time.

Where on-site PV is not feasible, asset owners may be looking to Power Purchase Agreements (PPAs), local energy trading, local microgrids or other options for reducing energy-related carbon emissions.

Think local and circular

One of the major wins with adapting, repositioning or upgrading an existing building is there is an immediate circular economy win. It can’t be said too often that the most sustainable building is the existing one we improve!

As part of audits on an existing asset, the circular economy approach looks to retain not only as much of the fabric as possible, but also as many parts of existing buildings as is safe, efficient and feasible. New elements can be designed for maximum re-use at end of life, and fitouts can be designed for disassembly and re-use.

At the federal government level there is a strong emphasis around stimulating smart, onshore manufacturing and closing the loop through recognising the potential to remake, recycle and redeploy existing materials. It would be positive to see basic building materials including aluminium fenestration assemblies, timber, glazing, legacy copper wiring and steel become feedstocks for Australian-made products for the construction industry.

“It can’t be said too often that the most sustainable building is the existing one we improve!”

Going all-electric

The ACT has drawn a line in the sand on gas, with the announcement that the reticulated gas network will be switched off in 2045. The principles for design, delivery and operational aspects of all-electric buildings are now out in the market, following the release in 2022 of the Cundall and Green Building Council of Australia Guide to Electrification for new buildings and the companion guide for existing buildings.

One of the prime market drivers for all-electric buildings is also the growing global financial imperative for asset owners, investors and portfolio managers to visibly address ESG (environment, social and governance) factors.

Emissions targets aligned to the Paris milestone of net zero by 2050, or to individual national, state or corporate targets that are aiming for net zero even sooner make electrification imperative. Energy use on-site is a key determinant of Scope 1 emissions, so any on-site combustion of gas for hot water, heating or cooking needs to be addressed. Uncertainty around gas pricing and the risk of asset stranding also play into this, as does the availability of cost-effective finance for upgrades that will deliver net zero, high performance properties.

2023 is one year closer to 2030 and beyond

The 2020s have so far been extremely challenging for everyone. What I hope for 2023 is that the hard lessons we’ve learned about prioritising human wellbeing, ensuring workplaces are safe and agile, managing energy more effectively and the critical mission to act now to address climate change can be turned into positive drivers for smarter, more inventive and more sustainable solutions to improve our urban habitat.