GREEN BUILDING IN SOUTH AFRICA GUIDE TO COSTS & TRENDS · of green building over and above the cost of conven onal construc on, expressed as a % of the total cost of the project

GREEN BUILDINGIN SOUTH AFRICAGUIDE TOCOSTS & TRENDSISBN: 978 1 919921 29 7

2019 EDITION

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GREEN BUILDING IN SOUTH AFRICAGUIDE TO COSTS AND TRENDS

DISCLAIMER: While the Green Building Council South Africa (GBCSA), the Associa on of South African Quan ty Surveyors (ASAQS) and the University of Pretoria (UP) aims to ensure that its publica ons represent best prac ce, the GBCSA, ASAQS and UP do not accept or assume any liability or responsibility for any events or consequences which derive from the use of this GREEN BUILDING IN SOUTH AFRICA – GUIDE TO COSTS AND TRENDS document. This GREEN BUILDING IN SOUTH AFRICA – GUIDE TO COSTS AND TRENDS document is not exhaus ve and is therefore only intended to provide general guidance to those who wish to make use of it. This publica on is provided “as is” without warranty of any kind, either expressed or implied including but without limita on to warran es of merchantability, fi tness for a par cular purpose and non-infringement

Copyright © 2019. All rights reservedNo part of this publica on may be reproduced or transmi ed in any form without the wri en permission of the publisher

PUBLISHED BYTHE GREEN BUILDING COUNCIL SOUTH AFRICA (GBCSA)

AND THE ASSOCIATION OF SOUTH AFRICAN QUANTITY SURVEYORS (ASAQS)

AND THE UNIVERSITY OF PRETORIA (UP)

ISBN: 978-1-919921-29-7Publica on date: April 2019

FOREWORD

1

The Green Building Council South Africa (GBCSA) was established in 2007. The event introduced a period of increased awareness and educa on in the South African built environment regarding the green building movement. With this emerged the percep on that green building a racts a signifi cant cost premium when compared to conven onal construc on. A similar view is likely to be held by other countries across the world.

To address this concern, the Cost of Green Building Study Commi ee was established in 2014, comprising of selectedmembers from the GBCSA, the Associa on of SouthAfrican Quan ty Surveyors (ASAQS) and the University of Pretoria (UP).

The purpose of the commi ee was to determine thecosts and trends associated with the cost of green buildings constructed in South Africa.The fi rst edi on of the GREEN BUILDING IN SOUTH AFRICA – GUIDE TO COSTS AND TRENDS booklet was published in 2016. The thorough, peer reviewed and validated research ensured outcomes and results that are highly relevant to all in the built environment.This 2019 edi on includes convincing results that bring more focus by confi rming previous outcomes and sharpening previous conclusions. It also includes addi onal analysis regarding the business case of green building to expand the study and provide greater insight.

NOTES TO CONSIDER

2

The reader of both the 2016 fi rst edi on (hereina er referredto as the 2016 report) and the 2019 edi on (hereina er referred to as the 2019 report) must take note of the following assump ons and/or qualifi ca ons and use the fi ndings of this study with due cau on and discre on.• The cost data used in the report has not been normalised

to allow for diff erences in specifi ca on level required by the specifi c grade of offi ce space provided (i.e. Premium grade, A grade, B grade, etc.) other than to evaluate the eff ect of base building cost on green cost premiums;

• The design methodology of the study used es mated cost based on elemental es mates for projects with “Design” Green Star cer fi ca on and fi nal cost for projects with “As Built” Green Star cer fi ca on. The actual cost data available did not always allow for this methodology

(i.e. only fi nal cost data may have been available for a project with “Design” cer fi ca on). However this

devia on is not considered to be of signifi cance as all study projects with both es mated and fi nal cost available indicated only very minor/insignifi cant diff erences between the es mated and fi nal cost;

• Changes in the Na onal Building Regula ons (SANS 10400) came into eff ect in 2011. These changes directly addressed design aspects of buildings associated with green building design. More exac ng building regula ons set for conven onal construc on should decrease the cost premium of green building. The changes in building regula ons were not specifi cally considered by the report other than the evalua on of cer fi ca on date on green cost premiums.

INTRODUCTION

3

The GBCSA was established in 2007. By the end of September 2018 a total of 400 buildings had been cer fi ed by the GBCSA, whilst more than 10,000 professionals had enrolled on GBCSA training courses.

The interna onal green building industry has expanded and matured signifi cantly during the past two decades. However a number of factors with the poten al to hamper the growth of the industry have also been iden fi ed during this period. This includes the percep on that green building a racts a signifi cant cost premium when compared to the cost of non-green/conven onal construc on. Before the publica on of the 2016 report, no data existed in South Africa to prove otherwise.

The purpose of the Cost of Green study is to describe the actual costs and trends of Green building in South Africain a credible, unbiased, consistent and user friendlymanner. The study fi ndings are based on actual case studies of office buildings that have been awarded a Green Star cer fi ca on.

The study includes all South African office buildings cer fi ed by the GBCSA which meet the following criteria

• Are 4, 5 or 6 Star Green Star cer fi ed buildings• Have either “Design” and/or “As Built” ra ngs• Used the Green Star Office v1/v1.1 ra ng tool

4

The 2016 report included a sample of 54 office buildings owned by 34 different companies. The 2019 report includes a sample of an addi onal 91 offi ce buildings owned by 52 companies that were cer fi ed from 2015 – 2018. Approval of owners was secured before the fi nancial detail of their buildings was included in this study.The Cost of Green study analysis of cost data and presenta on of the fi ndings is based on the ASAQS’s “Guide to Elemental Cost Es ma ng 2016” and the GBCSA’s “Green Star Offi cev1/v1.1” ra ng tool.The study reports on two primary aspects of greenbuilding cost:1. THE GREEN DESIGN PENETRATIONThis indicates the extent to which the “Green Star Offi ce

v1/v1.1” ra ng tool has introduced green design into the diff erent elements of a project, expressed as a percentage(%) of total project cost. For example a penetra on factor of 45 % would indicate that green design has been integrated into 45 % of the total project budget.

2. THE GREEN COST PREMIUMThe green cost premium is defi ned as the addi onal cost of green building over and above the cost of conven onal construc on, expressed as a % of the total cost of theproject. For example, a green building project which costs R100 million in total and includes green building costs ofR3 million over and above the cost of conven onal construc on, is considered to have a green cost premium of R3m/R100m x 100/1 % = 3 %;

THE STUDY

5

To describe green building cost in more detail, the above two primary aspects are then analysed in terms of the following:

• Cer fi ca on level Evalua ng green building costs in terms of the three

diff erent cer fi ca on levels i.e. 4 Star, 5 Star, or 6 Star Green Star cer fi ca on;

• Loca on Evalua ng the eff ect of loca on on green building costs.

Building costs o en vary between diff erent provinces in South Africa;

• Construc on area Evalua ng the eff ect of the size of a building on the green

building cost premium (GBCP). Larger projects o en

a ract more compe ve building rates compared to smaller projects, due to economies of scale. Larger construc on companies may achieve higher levels of effi ciency/produc vity. However, mega projects (i.e. major sport stadiums or power sta ons) may restrict eff ec ve compe on which in turn may result in higher building costs;

• Base building cost Evalua ng the eff ect of base building cost (R/m2) on

GBCP. A project with a higher base building cost could expect to have a lower GBCP. However, a project with a low base building cost could expect to have a higher green cost premium. The study evaluated the eff ect of base building cost on the GBCP;

con nuedTHE STUDY

6

• Ver cal façade ra o Evalua ng the eff ect of the ver cal façade:construc on

area ra o on the GBCP. The interac on between a building and the physical environment takes place to a large degree via the ver cal façade of the building. Therefore, the ver cal façade area is closely associated with green building design. The study evaluated the eff ect of façade:construc on area ra o on the GBCP;

• Cer fi ca on date Evalua ng the eff ect of me/maturity of the green

industry on the GBCP. Green building has introduced new concepts to the construc on industry. Over me,

the risks associated with new green concepts are seen to be reducing and is being replaced by greater certainty in terms of green design and costs related thereto. The study evaluated the eff ect of me on the GBCP;

• Tenant mix Evalua ng the eff ect of single corporate vs generic tenant

mix on the GBCP. The majority of the offi ce buildings cer fi ed by the GBCSA were buildings designed for single, corporate tenants. Corporate clients tend to place a high value on marke ng and public image and should therefore be inclined to spend more on their buildings. The study evaluated the eff ect of tenant mix on the GBCP;

con nuedTHE STUDY

7

• Cer fi ca on ra ng The Green Star Offi ce v1/v1.1 tool allows for “Design” and “As Built” Green Star cer fi ca on ra ng. The study

evaluated the eff ect of the cer fi ca on ra ng mix on the GBCP.

• Ra ng tool categories Evalua ng the GBCP in terms of the categories of the

Green Star Offi ce v1/v1.1 tool. The Green Star Offi ce v1/v1.1 tool consists of nine diff erent categories and a

total of 69 credits. The tool therefore off ers many design alterna ves when pursuing Green Star cer fi ca on.

con nuedTHE STUDY

The study evaluated the por on of the GBCP spent on each of the categories of the Green Star

ra ng tool.

• Addi onal analysis Addi onal analysis has been included in the 2019 report

which includes comparing the green building cost of public sector vs private sector offi ce buildings and looks to expanding the “loca on” analysis to focus on important business nodes in future.

8

The profi le of the combined study popula on size of 146 projects provides context for the study results which follow.The study popula on size is made up of 54 projects (37,0 %) cer fi ed from 2009 – 2014 and 92 projects (63,0 %)cer fi ed from 2015 – 2018. A total of 99 projects (67,8 %) have a 4 Star Green Star cer fi ca on, 38 projects (26,0 %) have a 5 Star Green Star cer fi ca on and 9 projects (6,2 %)have a 6 Star Green Star cer fi ca on (see Figure 1).

GBCSA CERTIFIED OFFICE PROJECTS 2009 2018FIGURE 1

SAMPLE PROFILE

Num

ber o

f pro

ject

s

Cer fi ca on level

38

61

2513

3 6

5 Star4 Star 6 Star0

10

20

30

40

50

60

702009/14

2015/18

28

11

3

27

62

Popula on Size

Sample Size

9

Of all cer fi ed offi ce projects in the study popula on size a total of 89 offi ce projects (61,0 %) are located in Gauteng with 32 offi ce projects (21,9 %) from the Western Cape and 22 offi ce projects (15,2 %) from Kwazulu-Natal (see Figure 2).

PROJECT LOCATION FOR OFFICE PROJECTS CERTIFIEDFIGURE 2

con nuedSAMPLE PROFILE

Num

ber o

f pro

ject

sLoca on

33

56

2111 9

113

2Western Cape KZN OtherGauteng

0

10

20

30

40

50

60

702009/14

2015/18

2821

8 51

95

Popula on Size

Sample Size

10

The number of offi ce projects cer fi ed per year clearly indicates the substan al and sustained growth in green building in South Africa since 2009 (see Figure 3).

The slow-down in growth no ceable from 2016 – 2018 is largely due to the severely challenging business condi ons experienced by the South African economy and specifi cally the construc on industry during recent years.

OFFICE PROJECTS CERTIFIED PER YEAR*FIGURE 3

con nuedSAMPLE PROFILE

Num

ber o

f pro

ject

s

Certifica on date

16

3

1318

13

27 27

20 18

2009 2010 2011 2012 2013 2014 2015 2016 2017 20180

5

10

15

20

25

30

35 2009/18Popula on SizeSample Size

14

8

14

8 9 107

16

* These projects only refer to GBCSA cer fi ca ons of new offi ce buildings using the Green Star Offi ce v1/v1.1 tool

STUDY RESULTS

GREEN DESIGN PENETRATION

11

12

The study revealed that the applica on of the Green Star Office v1/v1.1 tool to pursue Green Starcer fi ca on resulted in the introduc on of green design elements accoun ng for an average of 42,4 % of the budgets of projects included in the sample (42,7 % in the 2016 report). For some projects more than 80 % of the budget included green design elements. No clear correla on was apparent between the different levels of cer fi ca on and the green design penetra on achieved (see Table 1).

CERTIFICATION LEVEL

GREEN DESIGN PENETRATION CERTIFICATION LEVELTABLE 1

Cer fi ca on level –Green design penetra on (%)

83,0 %42,4%15,4 %TOTAL81,0 %

83,0 %

45,9 %

41,1 %

47,3 %

38,4 %

15,4 %

22,2 %

15,8 %

4 STAR

5 STAR

6 STAR

MAXAVERAGEMIN

GREEN DESIGN PENETRATIONSTUDY RESULTS

13

The average green design penetra on of projects remained between 40 % and 45 %, except in 2015 when the average penetra on level dropped to 38,8 % (see Table 2).

CERTIFICATION DATE

GREEN DESIGN PENETRATION CERTIFICATION DATETABLE 2

Cer fi ca on date – Green design penetra on (%)

83,0 %42,4 %15,4 %73,5 %

71,4 %

63,4 %

42,7 %

38,8 %

42,1 %

17,6 %

17,6 %

21,6 %

MAXAVERAGEMIN

TOTAL2009/14

2015

2016

con nuedGREEN DESIGN PENETRATIONSTUDY RESULTS

43,8 %40,8 %39,2 %2017

83,0 %44,2 %15,4 %2018

14

CERTIFICATION DATE con nued

GREEN DESIGN PENETRATION CERTIFICATION DATEFIGURE 4

con nuedGREEN DESIGN PENETRATIONSTUDY RESULTS

Gre

en d

esig

n pe

netr

a o

n %

Certifica on date2009/14 2015 2016 2017 2018

0

20

40

60

80

100

43,8 %

Minimum Average Maximum

40,8 %

83,0 %

15,4 %

44,2 %

39,2 %

73,5 %

42,7 %

17,6 %

71,4 %63,4 %

17,6 % 21,1 %

42,1 %38,8 % 4

STUDY RESULTS

GREEN COST PREMIUM

15

16

GREEN COST PREMIUM CERTIFICATION LEVELTABLE 3

Cer fi ca on level –Green cost premium (%)

14,2 %3,9 %1,1 %TOTAL14,2 %

12,0 %

5,2 %

3,5 %

1,1 %

1,1 %

2009/14

2015/18

MAXAVERAGEMIN

The total average green building cost premium achieved by the projects sampled (as expressed by the median*) has reduced from 5,2 %in the 2016 report to 3,9 % in this report.

The average green cost premium of offi ce projects cer fi ed in the period 2015 – 2018 has posi vely decreased from 5,2 % for the previous period 2009 – 2014 to 3,5 %.

CERTIFICATION LEVEL

GREEN COST PREMIUMSTUDY RESULTS

* see note on page 18 for mo va on of choice of median as indicator of central tendency

17

GREEN COST PREMIUM CERTIFICATION LEVELTABLE 4

Cer fi ca on level –Green cost premium (%)

14,2 %3,9 %1,1 %TOTAL14,2 %

11,7 %

11,7 %

3,9 %

3,5 %

10,2 %

1,1 %

1,8 %

8,6 %

4 STAR

5 STAR

6 STAR

MAXAVERAGEMIN

The average green building cost premium was 3,9 % of the total project cost. The lowest costpremium reported was 1,1 % andthe highest was 14,2 %. Both Table 4 and Figure 5 indicate the posi vecorrela on between green cost premium and cer fi ca on level.

CERTIFICATION LEVEL con nued

con nuedGREEN COST PREMIUMSTUDY RESULTS

18

GREEN COST PREMIUM CERTIFICATION LEVELFIGURE 5


NOTE: The choice of indicator for the central tendency of the data (to describe the average green building cost premium) was the median. The median is the midpoint of a frequency distribu on or the numerical centre of a set of data. Since the data sample was right skewed (0,942), the median was chosen as the preferred indicator over the arithme c mean as it is less sensi ve to skewed data.

CERTIFICATION LEVEL con nued

Gre

en c

ost p

rem

ium

%

Certifica on level5 Star4 Star 6 Star

0

2

4

6

8

10

1210,2 %

8,6 %

4,5 %3,9 %3,2 %

6,6 %

3,4 %

3,5 % 2015/18Average2009/14

10,9 %

19

The average green cost premium of 6,3 % for projects in KZN was signifi cantly higher when compared to the projects from other loca ons (see Table 5).

LOCATION

GREEN COST PREMIUM LOCATIONTABLE 5

Loca on –Green cost premium (%)

14,2 %3,9 %1,1 %TOTAL10,7 %

14,2 %

11,7 %

3,9 %

3,4 %

6,3 %

1,1 %

1,7 %

3,6 %

GAUTENG

WESTERN CAPE

KZN

MAXAVERAGEMIN


20

LOCATION con nued

GREEN COST PREMIUM LOCATIONFIGURE 6


Gre

en c

ost p

rem

ium

%

Certifica on levelWestern CapeGauteng KZN

0

2

4

6

8

10

122015/182009/14

5,2 %

3,3 %

7,8 %

3,2 %

7,4 %

4,5 %

21

PRIVATE VS PUBLIC SECTOR PROPERTIES

GREEN COST PREMIUM PRIVATE VS PUBLIC SECTOR PROPERTIESFIGURE 7


Private sector owned offi ce buildings with Green Star cer fi ca on seem to have a lower green cost premium compared to public owned offi ce buildings

Gre

en c

ost p

rem

ium

%Design Ra ng

16141210

8642

Public Sector Proper es Private Sector Proper es0

MinimumAverageMaximum

14.2 %

6.3 %

2.0 %

12.1 %

3.9 %

1.1 %

22

Both Table 6 as well as Figure 8confi rm the strong nega ve correla on between green cost premium and construc on size.The larger projects managed to achieve a Green Star cer fi ca on at a much lower average green cost premium when compared to smaller projects.

CONSTRUCTION AREA

GREEN COST PREMIUM CONSTRUCTION AREATABLE 6

Construc on area –Green cost premium (%)

14,2 %3,9 %1,1 %TOTAL12,2 %

14,2 %

12,0 %

5,0 %

3,9 %

5,1 %

4,0 %

5,2 %

3,2 %

2,4 %

3,4 %

1,7 %

2,7 %

1,1 %

2,0 %

< 5,000 m2

< 10,000 m2

< 25,000 m2

< 50,000 m2

> 50,000 m2

MAXAVERAGEMIN


23

GREEN COST PREMIUM CONSTRUCTION AREAFIGURE 8


CONSTRUCTION AREA con nuedThe previous strong nega ve correla on (r = – 0,915) between green cost premium and construc on size of offi ce buildings was confi rmed by the 2015/18 data (r = – 0,906).

The data confi rmed that the cost premium for buildings smaller than 5,000 m2 has reduced signifi cantly from 9,3 % to 4,6 %. G

reen

cos

t pre

miu

m %

Construc on Area< 5,000 m2 < 10,000 m2 < 25,000 m2 < 50,000 m2 > 50,000 m2

0

2

4

6

8

10

122015/182009/149.3 %

4.6 %

6.0 %

4.0 %

6.9 %

4.7 %

3.7 %

3.2 %2.6 %2.4 %

24

The base building cost has been calculated as the total project cost minus the basement cost divided bythe building construc on area minus the basement area. To allow for the me value of money, all costs were

escalated to December 2018. The base building cost of the project sample ranged from R9,428/m2 to R25,161/m2

with an average cost of R14,334/m2.To evaluate the rela onship between base building cost and green cost premium, the base building cost range was split into fi ve categories that are

BASE BUILDING COST

GREEN COST PREMIUM BASE BUILDING COST AT 12/2018TABLE 7

Base building cost (R/m2) –Green cost premium (%)

11,7 %

10,0 %

5,0 %

4,7 %

3,3 %

3,6 %

1,7 %

1,1 %

1,1 %

1,8 %

< 90,0 %

< 97,5 %

< 102,5 %

< 110,0 %

MAXAVERAGEMIN

…con nued overleaf


12,2 %3,0 %2,0 %> 110,0 %

9,8 %

7,4 %

25

GREEN COST PREMIUM BASE BUILDING COSTFIGURE 9all defi ned in rela on to the averagecost. The categories are – much lower(< 90,0 %), lower (90,0 % – 97,5 %), similar (97,5 % - 102,5 %), higher(102,5 % - 110,0 %) or much higher(> 110,0 %) than the average base building cost.The 2016 report revealed a posi ve rela onship between base building cost and green cost premium (r = 0,68)in contrast to the expected outcome. Buildings from 2015 – 2018 however had a nega ve rela onship between base building cost and green cost premium(r = – 0,83) (see Table 7 and Figure 9).


BASE BUILDING COST con nued

Gre

en c

ost p

rem

ium

%Base building cost category

< 90% < 90 –– 97,5 %

< 97,5– 102,5 %

< 102,5– 110%

> 110%0

2

4

6

8

10 2015/18 2009/14

6.6 %

3.0 %

8.2 %

2.3 %

7.0 %

3.3 %

5.8 %

4.7 %

5.1 %4.9 %

26

The ra o of ver cal façade:construc on area of the sample projects varied from 0,24:1 to 0,84:1 with an average of0,46:1. To evaluate the rela onship between façade ra o and green cost premium, the façade ra o range was split into fi ve categories that are all defi ned in rela on to the average ra o. The categories are – much lower (< 0,38:1), lower (0,38 – 0,44:1), average (0,45 – 0,50:1), higher (0,51 – 0,56:1) or much higher (> 0,56:1) than the average ra o.

VERTICAL FAÇADE RATIO

GREEN COST PREMIUM VERTICAL FAÇADE RATIOTABLE 8

Ver cal façade ra o –Green cost premium (%)

11,7 %

8,2 %

10,0 %

11,7 %

12,2 %

3,8 %

3,6 %

3,8 %

4,7 %

8,9 %

2,0 %

1,1 %

2,0 %

2,9 %

1,7 %

Much ↓ than average (< 0,38:1)

↓ than average (0,38 – 0,44:1)

Average (0,45 – 0,50:1)

↑ than average (0,50 – 0,56:1)

Much ↑ than average (> 0,56:1)

MAXAVERAGEMIN

…con nued overleaf


27

GREEN COST PREMIUM VERTICAL FAÇADE RATIOFIGURE 10Table 8 and Figure 10 indicate the correla on between ver cal façade ra o and green cost premium. The 2015/2018 data revealed a strong posi ve correla on with the façade ratio (r = 0,807). This indicates that buildings with an above average ver cal façade:construc on area ra o also tend to have a much higher green cost premium.


VERTICAL FAÇADE RATIO con nued

Gre

en c

ost p

rem

ium

%Façade ra o categories

Muchlower

Lower Average Higher Muchhigher

0

2

4

6

8

10

122015/182009/14

8.1 %

8.9 %

4.4 %

11.7 %

3.4 %

5.2 %

3.3 %

4.5 %

3.3 %

3.8 %

28

The 2016 report suggested a maturing of the South African green industry with a slight decline in average green cost premium between 2010 - 2014. The 2019 report confi rms that the green cost premium is declining as the green industry matures (r = – 0,51). Table 9 and Figure 11 indicate as a general trend that since 2011, green cost premiums appear to be declining.

CERTIFICATION DATE

GREEN COST PREMIUM CERTIFICATION DATETABLE 9

3,6 %3,6 %3,6 %201011,7 %8,3 %6,8 %201112,2 %8,2 %2,7 %201214,2 %3,5 %1,7 %201310,2 %6,6 %1,1 %20148,1 %4,2 %2,0 %20158,6 %3,2 %1,1 %20168,6 %3,2 %2,3 %2017

12,0 %3,9 %1,8 %2018

Cer fi ca on date – GCP (%) MAXAVERAGEMIN

GCP = Green Cost Premium


29

GREEN COST PREMIUM CERTIFICATION DATEFIGURE 11


CERTIFICATION DATE con nued

Gre

en c

ost p

rem

ium

%Certifica on date

16141210

8642

2010 2011 2012 2013 2014 2015 2016 2017 20180

MinimumAverageMaximum

8,6 %

12,0 %

4,2 %

8,1 %10,2 %

14,2 %12,2 %

11,7 %

3,6 %

3,6 %3,6 %

6,8 %

8,3 %

2,7 %

8,2 %

3,5 %

1,7 %

1,1 % 2,0 %

1,1 %

3,2 % 3,9 %

6,6 %

%

8,6 %

1,8 %3,2 %

2,3 %

30

Table 10 and Figure 12 confi rm that projects with a single corporate client, will on average have a higher green cost premium compared to projects with a mul ple tenant mix.

The gap between the green cost premium of single tenanted buildings vs mul ple tenant buildings did however narrow drama cally from 4,5 % in the 2016 report to 0,2 % for the 2015 – 2018 projects.

TENANT MIX

GREEN COST PREMIUM TENANT MIXTABLE 10

Tenant mix –Green cost premium (%)

14,2 %3,9 %1,1 %TOTAL14,2 %

12,0 %

4,9 %

3,4 %

1,8 %

1,1 %

SINGLE CORPORATE

MULTIPLE TENANTS

MAXAVERAGEMIN


31

GREEN COST PREMIUM TENANT MIXFIGURE 12


TENANT MIX con nued

Gre

en c

ost p

rem

ium

%Tenant Mix

Single Corporate Mul ple Tenants0123456789

2015/182009/14

3,5 %

8,1 %

3,3 %3,6 %

32


CERTIFICATION RATINGAn evalua on of the “Design” versus the “As Built” Green Star cer fi ca on ra ng achieved by the sample projects, revealed that from 2009 – 2014 projects with a “Design” cer fi ca on ra ng maintained a lower average green cost premium compared to projects with an “As Built” cer fi ca on ra ng. However from 2015 – 2018 the projects with an “As Built” cer fi ca on ra ng had a lower average green building cost premium.

2009 – 2014 projects: 5,0 % vs 8,8 %2015 – 2018 projects: 3,8 % vs 3,4 %.

GREEN COST PREMIUM DESIGN CERTIFICATION RATINGFIGURE 13

Gre

en c

ost p

rem

ium

%

Design Ra ngDesign As Built

0123456789

2015/182009/14

3.4 %3.8 %

8.8 %

5.0 %

33

The alloca on of the green cost premium to the nine categories of the Green Star Offi ce v1 tool revealed that more than 57 % of the total green cost premium was allocated to only two categories namely, Energy and Indoor Environment Quality. It is notable that the fi ve categories comprising Energy, Indoor Environment Quality, Management, Materials and Water, made up for more than 88 % of the total green cost premium alloca on (see Table 11 and Figure 14).

RATING TOOL CATEGORIES

GREEN COST PREMIUM RATING TOOL CATEGORIESTABLE 11

Ra ng tool categoriesMANAGEMENTINDOOR ENVIRONMENT QUALITYENERGYTRANSPORTWATERMATERIALSLAND USE AND ECOLOGYEMISSIONSINNOVATION

Green cost premium alloca on (%)11,923,333,93,58,2

11,31,35,90,8


34

GREEN COST PREMIUM RATING TOOL CATEGORIESFIGURE 14


RATING TOOL CATEGORIES con nuedAl

loca

on

(%)

WaterManagement IndoorEnvironment

Quality

Energy Transport Materials Land useand Ecology

Emissions Innova on05

10152025303540

11,0

Offi ce v1 Categories

12,7

26,020,9

31,635,9

3,4 3,69,3 7,1

10,0 12,5

1,8 0,86,8

0,35,2

1,3

2009/14

2015/18

CONCLUSION

35

• Green building in South Africa has grown signifi cantly since 2009;

• Offi ce buildings of all sizes have successfully applied for Green Star cer fi ca on;

• Green Star cer fi ed buildings are currently located predominantly in Gauteng, the Western Cape and the Durban/Umhlanga area of Kwazulu-Natal;

• Since 2015, generic offi ce buildings that have been developed for a mul -tenant mix, make up for 71 % of all Green Star cer fi ed buildings;

• Pursuing Green Star cer fi ca on through the Green Star Offi ce v1/v1.1 tool, has resulted in an average green

design penetra on of 42,4 % of the total project budget;

• Higher levels of cer fi ca on (4 Star, to 5 Star, to 6 Star) has resulted in a progressive increase in the green cost premium;

• The green cost premium appears to be progressively diminishing over me, largely as a result of a growing maturity in the green industry;

• The total average green cost premium over and above the cost of non-green buildings is 3,9 % for the cumula ve period 2009 – 2018 compared with 5,2 % for the previous period 2009 – 2014. This is supported by a posi ve reduc on in the average green cost premium to 3,5 % for the period 2015 – 2018;

36

• Compared to smaller offi ce buildings, large offi ce buildings generally achieved Green Star cer fi ca on with lower green cost premiums;

• Offi ce buildings with higher ver cal façade:construc on area ra os tended to have higher green cost premiums;

• Offi ce buildings that were developed for single corporate tenants had ini ally a racted higher green cost premiums compared to buildings developed for a mul -tenant mix. Since 2015 this gap has almost disappeared;

con nuedCONCLUSION

• Originally, office buildings with higher base building costs did not necessarily achieve lower green cost

premiums, but more recently such buildings seem to be achieving lower green cost premiums and

• Two categories of the Green Star Office v1/v1.1 tool i.e. Energy and Indoor Environment Quality made up for 58 %

of the alloca on of the total green cost premium.

37

The Associa on of South African Quan ty Surveyors

Mr Larry Feinberg

Dr Deen Letchmiah

Mr Karl TruslerGreen Building Council South Africa

Mr Manfred Braune

Par cipa ng Property Owners

Abland Property Developers

Absa Bank Ltd

Alchemy Property Development

A erbury Property

Capitalgro (Pty) Ltd

Chevron South Africa (Pty) Ltd

Cinzaco 128 (Pty) Ltd

Citadel Investment Services

City of Cape Town

University of PretoriaDepartment of Construc on Economics

Mr Danie Hoff man (researcher)

2019 EDITIONACKNOWLEDGEMENTS

38

Shree Property Holdings

Smartgrowth Investments (Pty) Ltd

The South African Na onal Roads Agency Ltd

Tower Property Fund Ltd

V & A Waterfront Holdings (Pty) Ltd

Western Cape Department ofTransport and Public Works

Zenprop Property Holdings (Pty) Ltd

Zatovect (Pty) Ltd

con nued

Menlyn Maine Investment Holdings

Nedbank Limited

Old Mutual Property

Pegasus One Rental Enterprise

Penalten Investments (Pty) Ltd

Rabie Property Group (Pty) Ltd

Rangewave Trade and Trust

Redefi ne Proper es Limited

Sharmane Investments (Pty) Ltd

Department of Environmental Aff airs

Department of Public Works

Dipalopalo Concessions (Pty) Ltd

Equites Property Fund

Eris Property Group

First Na onal Bank

Growthpoint Proper es Limited

Ingenuity Property Investments Ltd

Liberty Group Limited

2019 EDITIONACKNOWLEDGEMENTS

39

MLC Quan ty Surveyors SA (Pty) Ltd

Narker & Associates cc

Pasqa Africa (Pty) Ltd

Quan cost Quan ty Surveyors

RLB Pentad Quan ty Surveyors

Par cipa ng Quan ty SurveyingFirms

AECOM South Africa (Pty) Ltd

BTKM Quan ty Surveyors

Brian Heineberg & Associates (Pty) Ltd

BWR Quan ty Surveyors

Fergus D’Arcy

FWJK

Gro2 Consul ng

con nued2019 EDITIONACKNOWLEDGEMENTS

Par cipa ng Green StarAccredited Professionals

AECOM

Agama

Arup

Aurecon

Bornman & Associates

LMC Green Consul ng

Ludwig Design Consul ng

40

Mo MacDonald

PJ Carew Consul ng

Royal HaskoningDHV

Silito

Solid Green Consul ng

Terramanzi

WSP

With reference to the new 2015/18 projects, special men on must be made of Abland who contributed 11 projects for the study, to Quan costwho submi ed 12 fi nancial transparency disclosures, to WSP who submi ed details on 21 projects and to Solid Green who submi ed details on 19 projects.

con nued2019 EDITIONACKNOWLEDGEMENTS

The ASAQS, GBCSA and UPsincerely thank all building owners, Quan ty Surveyors and Green Star Accredited Professionals who contributed to this updated study by providing the necessary project cost data.

SUPPLEMENT

INSIGHTS FOR PERFORMANCE

S1

IPD SA ANNUAL GREEN PROPERTY INDEX

EXTRACTS FROM

COURTESY OF MSCI

JULY 2018

S2

IPD SA ANNUAL GREEN PROPERTY INDEX*INTRODUCTION

The focus of a en on thus far in the ASAQS/GBCSA/UP study has been on the cost premium of a Green Star cer fi ed building over and above the cost of a non-green cer fi ed building based on the ini al capital cost.

In terms of real estate investment, both the ini al capital cost and the fi nancial performance of a building in opera on are important. The “business case” for a comprehensive investment decision should include both the cost premium on the ini al capital cost of a Green Star cer fi ed building and the fi nancial performance of the building in opera on.

The fi nancial performance of a building includes its income genera ng ability/poten al and the eventual calcula on of

its market value. The income genera ng ability of abuilding will be aff ected by aspects such as average rentalsachieved, rental/income growth, opera ng cost andvacancy rates.

Higher average rentals, higher rental growth, lower opera ng cost and lower vacancy rates will all increase the opera onal income of a building. The calcula on of the market value of a building will be infl uenced by the capitalisa on rate applied. If the risk associated with the future cash fl ow stream of a building is reduced (with a corresponding reduc on in the capitalisa on rate used to calculate the market value) the result will be a higher market value.

S3

The MSCI index extracted from Insights for Performance - IPD SA Annual Green Property Index – July 2018 is based on the fi nancial performance of Green Star cer fi ed buildings vs non-green cer fi ed buildings in South Africa. The results are posi ve for Green Star cer fi ed building.

The MSCI index based on the fi nancial performance of a building together with the GBCSA/ASAQS/UP data based on the green cost premium on the ini al capital cost of a building, produces a convincing business case in support of Green Star cer fi ed buildings.

con nuedIPD SA ANNUAL GREEN PROPERTY INDEX*INTRODUCTION

* The IPD Green Property Index is an annual index released jointly every year by MSCI and GBCSA and is sponsored by Growthpoint.

S4

PRIME & A GRADE OFFICES DECEMBER 2017SAMPLE SIZE

1821

323

SOUTH AFRICA IPD ANNUAL UNIVERSE

ALL GREEN STARCERTIFIED

PRIME & A GRADEOFFICE SAMPLE

200 85NON GREEN

CERTIFIEDGREEN STARCERTIFIED

S5

GREEN STAR OFFICES HIGHER RETURN IN 2017FINDINGS

OUTPERFORMANCE ON 2017 TOTAL RETURN

TOTAL RETURNFIGURE S1

% o

f sta

ndin

g in

vest

men

ts

14

12

10

8

6

4

2

0

11,6

GREEN STAR CERTIFIED:Prime & A-grade Offi ces

NON-GREEN CERTIFIED:Prime & A-grade Offi ces

8,0

S6

GREEN STAR OFFICES HIGHER RETURN IN 2017FINDINGS

DRIVEN BY SUPERIOR CAPITAL GROWTH

CAPITAL GROWTH AND INCOME RETURNFIGURE S2%

of s

tand

ing

inve

stm

ents

-202468

101214

11,6



8,03,3

8,0 8,8

-0,8

Capital Growth

Income Return

TOTAL RETURN

*

*The components of Total Return are calculated separately using chain-lined me weighted rates of return. Mul -period capital growth and income return do not always add up perfectly when determining Total Return, due to the cross product that occurs when the Capital and Income Returns are combined within compounded Total Returns. Therefore, in this par cular instance when adding up the Capital and Income Return components they do not exactly equal the Total Return.

S7

DRIVERS OF GREEN CAPITAL GROWTHFINDINGS

VALUATION METRICS & PROPERTY FUNDAMENTALS

DISCOUNT RATEFIGURE S3

Dis

coun

t rat

e

1816141210

86420

14,0


14,2


CAPITALISATION RATEFIGURE S4

Capi

talis

a o

n ra

te

0

2

4

6

8

10

12

8,2


8,8


S8

VALUATION METRICS & PROPERTY FUNDAMENTALS con nued

NET INCOME GROWTHFIGURE S5N

et in

com

e gr

owth

0

1

2

3

4

5

6

3,8


3,5


VACANCY RATEFIGURE S6

Vaca

ncy

rate

0

2

4

6

8

10

12

5,0


10,1


con nuedDRIVERS OF GREEN CAPITAL GROWTHFINDINGS

S9

1 % LESS ELECTRICITY & 24 % LESS WATER THAN NON CERTIFIED

ELECTRICITY USAGEFIGURE S7

kWh/

occu

pied

m2 p

er a

nnum

0

210

180

150

120

90

60

30


177,0


WATER USAGEFIGURE S8

m3 /

occu

pied

m2 p

er a

nnum

0

0,2

0,4

0,6

0,8

1,0

1,2

1,4

0,6


0,9


GREEN STAR CERTIFIED OFFICES MORE EFFICIENTFINDINGS

175,2

S10

CONCLUSION

• Green Star cer fi ed prime and A-grade offi ces produced a total return of 11,6 % in 2017 vs 8,0 % for non-green cer fi ed prime and A-grade offi ces.

• Capital growth drove outperformance (3,3 % vs - 0,8 %).

• Green Star cer fi ed prime and A-grade offi ces reported a 1 % lower electricity usage per occupied square metre and a 24 % lower water usage per occupied square metre.

• Green Star cer fi ed offi ce capital growth is driven by superior valua on metrics and property fundamentals:

• Lower discount rate

• Lower capitaliza on rate

• Higher net income per m2

• Higher net income growth

• Lower vacancy rate

The ASAQS, GBCSA and UP wish to extend their gra tude and apprecia on to Phil Bar ram, Execu ve Director of MSCI for the permission granted to include extracts from, Insights for Performance – IPD SA Annual Green Property Index – July 2018.

ACKNOWLEDGEMENTS

SPONSORS We wish to thank the following organisa ons for their generous support in sponsoring theproduc on of this ground breaking document

[email protected]

+27 (0) 21 975 7886

Best Africa Consul ng Bopelokgale (Pty) Ltd

[email protected]

+27 (0) 78 746 9988

[email protected]

+27 (0) 76 801 8402

HereToday Mbatha Walters & Simpson (Pty) Ltd

[email protected] www.mbathawaltersandsimpson.com

+27 (0) 11 234 2696

SPONSORS CONTINUED

MM Sakonda and Associates

[email protected]

+27 (0) 15 291 5662or +27 (0) 83 628 5466MM SAKONDA & ASSOCIATES

[email protected]

+27 (0) 12 664 7608

QS TWO Quan ty Surveyors (Pty) Ltd

[email protected]+27 (0) 16 423 6422

Quanpro Rider Leve Bucknall (ZA) (Pty) Ltd trading as RLB Pentad

[email protected] www.rlb.com

+27 (0) 12 348 1040

Quan ty Surveying &Project Management


[email protected] [email protected]

www.senekalallen.com+27 (0) 21 914 0040

Senekal Allen & Partners CC

[email protected]

+27 (0) 11 447 2797

Solid Green Consul ng cc

Sutherland Quan ty Surveyors

[email protected]+27 (0) 83 255 6391

[email protected]+27 (0) 39 315 1962

TVA Quan ty Surveyors & Associateswww.facebook.com/SutherlandQS

www.asaqs.co.za

T +27 (0) 11 315 4140/1/2 I F +27 (0) 86 601 7087administra [email protected]

Suite G6, Building 27Thornhill Offi ce Park

94 Bekker Road, Vorna Valley 1686

www.gbcsa.org.za

T +27 (0) 86 104 [email protected]

2nd Floor, The Old Warehouse BuildingBlack River Offi ce Park, 2 Fir Street

Observatory 7925

www.up.ac.za

T +27 (0) 12 420 4972 I F +27 (0) 12 420 [email protected] I danie.hoff [email protected]

Department of Construc on EconomicsBuilding 5, South Campus, University of Pretoria

Lynnwood Road, Pretoria 0002

2019 EDITION

Documents

GREEN BUILDING IN SOUTH AFRICA GUIDE TO COSTS & TRENDS · of green building over and above the cost of conven onal construc on, expressed as a % of the total cost of the project