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Existing Buildings Retrofits

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					Green Building Council
South Africa Summit
Cape Town

Existing Buildings
Retrofits
22 October 2009
Pippa Connolly
Leader Buildings Sustainability,
Melbourne
existing
buildings//
survival
strategies
A toolbox for re-energising tired assets

   PCA approached Arup to
    utilise global expertise to write
    the guide
   13 weeks to deliver
   Huge interest
   Copied globally
                 6 step plan




Call to arms !
Six Steps


Step #1 Determine Your Baseline


Step #2 Establish Your Targets and Goals


Step #3 Review Your Building Maintenance, Housekeeping and Energy Purchase Strategy


Step #4 Crunch Time: Refurbish Or Demolish


Step #5 Select Your Optimal Upgrade Initiatives


Step #6 Make It Happen
Step #5: Select Your Optimal Upgrade Initiatives

                                          Qualitative
      Basic           Typical level of
                                            measure
   description        refurbishment
                                         of capital cost
      of the              usually
                                         Requirement
    initiative          required for
                                             for the
                       this initiative
                                            initiative
Step #5: Select Your Optimal Upgrade Initiatives


     The qualitative
                        The qualitative     The qualitative
      benefit of the
                         benefit of the      benefit of the
      initiative with
                        initiative to the      Initiative
        respect to
                            occupant         to the owner
      sustainability
follow up to
existing
buildings//
survival
strategies
A toolbox for re-energising tired assets

Joined by Davis Langdon
& Colliers International
Focus on a More Practical Application

How do you decide what
initiatives to choose?

What will they cost?

What will the financial
implications be?

The first booklet was the
toolbox; this is the nuts
and bolts
Methodology
   Established three existing
    1980’s buildings; in CBD,
    fringe CBD & a suburban
    office
   Appropriate refurbishment
    upgrade initiatives
    were selected for each case
   Capital cost estimated
   Energy and water savings
    estimated
   Cash flow analysis
Step #1
Determine Your Baseline
Step #1: Baseline
Typical baseline for a 1980s building
Case A – CBD Tower      Initial Indicator
Year of Construction    1984
PCA Quality Grade       C
Energy Performance      2.0 star NABERS
Water Performance       2.0 star NABERS
Waste Performance       1.5 star NABERS
Indoor Environment      2.0 star NABERS
Occupant Satisfaction   Many complaints, difficult to rectify. Above average absenteeism
Mechanical Systems      Investment required for material condition within 3 years. Increased consumption of consumables
                        Multiple modifications awaiting implementation
Electrical/IT/Comms     Requires attention. Increasing maintenance burden. Multiple modifications waiting implementation
Systems
Initial Gross Rent      $423/m2
Vacancy                 15% vacant for Level 1 – 3 upgrade. Level 4 upgrade is assumed to be unoccupied for the duration of the
                        construction works. Multi-tenanted building
Turnover                Initially 5 year lease term with staggered expiries. 0% tenant retention. 9 month gross down time, with
                        new leases having a 3 year term
Incentive Rate          100% Incentive payout*
                        * Incentive payout refers to the incentives given to a new tenant, or upon a lease renewal. This involves a period of free rent and/or cash payments.
Step #1: Baseline
Typical baseline for a 1980s building

Case B – Fringe Highrise      Initial Indicator
Year of Construction          1984
PCA Quality Grade Matrix      C
Energy Performance            2.0 star NABERS
Water Performance             2.0 star NABERS
Waste Performance             1.5 star NABERS
Indoor Environment            2.0 star NABERS
Occupant Satisfaction         Many complaints, difficult to rectify. Above average absenteeism
Mechanical Systems            Investment required for material condition within 3 years. Increased consumption of
                              consumables. Multiple modifications awaiting implementation
Electrical/IT/Comms Systems   Requires attention. Increasing maintenance burden. Multiple modifications waiting
                              implementation
Initial Gross Rent            $370/m2
Vacancy                       15% vacant for Level 1 – 3 upgrade. Multi-tenanted building

Turnover                      Initially 5 year lease term with staggered expiries. 0% tenant retention. 9 month gross down
                              time, with new leases having a 3 year term
Incentive Rate                100% Incentive payout
Step #1: Baseline
Typical baseline for a 1980s building

Case B – Suburban Office      Initial Indicator
Year of Construction          1984
PCA Quality Grade Matrix      C
Energy Performance            2.0 star NABERS
Water Performance             2.0 star NABERS
Waste Performance             1.5 star NABERS
Indoor Environment            2.0 star NABERS
Occupant Satisfaction         Many complaints, difficult to rectify. Above average absenteeism
Mechanical Systems            Investment required for materials condition within 3 years. Increased consumption of consumables.
                              Multiple modifications awaiting implementation
Electrical/IT/Comms Systems   Requires attention. Increasing maintenance burden. Multiple modifications waiting implementation
Initial Gross Rent            $255/m2
Vacancy                       15% vacant for Level 1 – 3 upgrade. Multi-tenanted building

Turnover                      Initially 5 year lease term with staggered expiries. 0% tenant retention. 9 month gross down time,
                              with new leases having a 3 year term
Incentive Rate                100% Incentive payout
Step #2
Establish Your Targets and Costs
Step #2: Targets
                           Target
PCA Quality Grade Matrix   Improved to B grade, with A grade services
Energy Performance         Increased to 4.5/5.0 NABERS
Water Performance          Increase to 4.0/4.5 NABERS
Waste Performance          Increase to 4.0 NABERS
Indoor Environment         Increase to 4.0 NABERS
Occupant Satisfaction      Few complaints. Below average absenteeism
                           100% planned availability and meeting current functional demands. No standing alarms,
Mechanical Systems
                           no losses or events fully meets design criteria
Electrical/IT/Comms
                           100% availability. No event reports due to equipment unreliability
Systems
Gross Rent                 Increase in rent to ensure positive return on investment
Vacancy                    Decrease in vacancy levels to ensure positive return on investment
Turnover                   Increase leasing period to 6 year terms. Increase in tenant retention probability to 50%

Incentive Rate             Decrease incentive rate to 50% of previous rate

                           Optimising the financial investment is a fundamental goal of building upgrades.
Other                      The financial aim is to make those improvements necessary to attract and retain tenants –
                           without unnecessary spending
Step #2: Targets
Step #2: Targets
Step #2: Targets


Primary upgrade goal
is to minimise the risk
of obsolescence by
improving building
performance up to
that of a new building.
Step #3
Review Maintenance, Housekeeping
& Energy Purchase Strategy
Step #3: Review
Have you
done these?               Suggest measures
o Good housekeeping       to bring building
  and maintenance         back to the way it
o Building fabric         was designed
o Controls
o Ventilation systems
o Refrigeration systems
o Lighting
o Heating and hot water
  systems
o Motors and drives
Case Study// Regis House, London UK
Management Initiatives
   Raise awareness of energy issues
    with tenants – newsletter, posters,
    energy mascot
   Run plant to reflect building
    occupation times
   Regular review and adjustment of
    set- points
   Empowering security and cleaners
    to turn lights off
   Resulted in 29% reduction in CO2
    emissions
   Energy cost saving of $110,000
Step #4:
Crunch Time: Refurbish or Demolish?
                                                                                Building is
Step #4: Upgrade Level                                                          Generally
Table 1 Building Performance – Simplified Assessment Table
                                                                                poor in
                                                                                Performance
Performance Grade                             Excellent   Good   Poor   Awful
                                                                                and condition
Thermal comfort                                                   
Energy consumption (NABERS rating)                                
Water consumption (NABERS rating)                                 
Mechanical systems                                                
Electrical/IT/comms systems                                       
Occupant satisfaction                                             
Percentage of NLA with 2.5% daylight factor                  
Flexible floor plate                                              
Amenity                                                      

Table 2 – Building condition – Simplified assessment table
Condition Grade                               Excellent   Good   Poor   Awful
Mechanical systems                                                
Electrical/IT/comms systems                                       

Building and civil                                               
Step #4: Upgrade Level
   Suggested that a Level 3
    refurbishment would be
    required to bring a building
    up to new build standard
   But – we tested all 4 levels
    to judge costs/
    improvements
Step #4: Upgrade Level


 • Level 1 – tune up and minor refurbishment
 • Level 2 – intermediate, includes level 1 and upgrade lighting
   controls, remove ceilings etc.
 • Level 3 – Major refurbishment , progressive replacement of
   major plant and services, internal finishes, raised floor,
   external solar control
 • Level 4 – Complete refurbishment – strip back to structure
 • Level 5 - demolition
Step #5:
Select Your Optimal Upgrade Initiatives
Step #5: Optimal Initiatives
Selected a set of relevant initiatives from the first booklet
What does it cost?
   ‘Packages’ of initiatives are
    costed on a $/m2 basis
   Based on current case study
    buildings, but provides a
    order of magnitude cost
                                    Level 1   Level 2   Level 3   Level 4
Investment Analysis Overview…
                                 Base Case         Level 1       Level 2         Level 3   Level 4
                Cap Ex ($/m2)        -               $35          $226            $980     $2040
       Case A
       CBD      Net Rent           $313              $313         $324            $365      $491
                Energy Savings       -               17%          26%             53%       56%

                                          Optimum Investment Achieves 10% IRR


                                 Base Case          Level 1       Level 2        Level 3
                Cap Ex ($/m2)        -                $37          $232           $997
       Case B   Net Rent           $290               $290         $300           $345
       Fringe   Energy Savings       -                17%          27%             56%

                                         Optimum Investment Achieves 11.2% IRR



                                 Base Case          Level 1       Level 2        Level 3
                Cap Ex ($/m2)        -                $33          $258           $959
       Case C
       Suburban Net Rent           $190               $190         $220           $280
                Energy Savings       -                18%          24%             54%

                                         Optimum Investment Achieves 10.9% IRR
Asset Improvement
Overview of Each Case
Case A – CBD Tower               Level 1        Level 2       Level 3      Level 4
NPV of Investment (10 Years)   -$19,000,000   -$15,000,000   $7,000,000   $4,500,000
IRR of Investment (10 Years)      4.2%           5.1%          10.0%        9.1%


Case B – Fringe High Rise
NPV of Investment (10 Years)   -$11,700,000   -$2,650,000    $4,200,000       -
IRR of Investment (10 Years)      5.4%           9.2%          11.2%          -


Case C – Suburban Office
NPV of Investment (10 Years)   -$1,900,000    -$1,000,000    $200,000         -
IRR of Investment (10 Years)      3.4%           7.7%          10.9%          -
Asset Improvement
Detailed View of Case A – CBD Tower
Case A – CBD Tower                 Existing      Level          Level         Level        Level
                                   Building        1              2             3            4

NPV of Investment (10 Years)          -       -$19,000,000   -$15,000,000   $7,000,000   $4,500,000

IRR of Investment (10 Years)          -          4.2%           5.1%          10.0%        9.1%

Capital Cost ($/m2)                   -           35             226           980         2040

PCA Grade                             C            C              B             B            A

NABERS Energy Rating                 2.0          3.0            3.5           4.5          4.5

Approx Reduction in CO2 pa            -          17%            26%           53%          56%

NABERS Water Ratings                 2.0          2.5            3.0           4.0          4.0

Approx Reduction in Water Use pa      -          16%            35%           67%          69%
Asset Improvement
What is the Market Value?
Case A – CBD Tower   Market Value 2009 ($m)   Increase from Base Case

Base Case                     58.4                       -

Level 1                       59.3                     1.5%

Level 2                       62.2                     6.5%

Level 3                       64.4                    10.3%

Level 4                       63.2                     8.2%




                                                Valuation Performed by Colliers International
Comparative Payback Periods
The CBD Case Study



               High Vacancy         Less Market Appeal
            Low Capitalised Value
               Non-Compliant


                                        Higher Asset Value
The Need for Incentives
The CBD Level 3 Case Study
Sensitivity Analysis
The uncertain future…
                              Business As Usual Case –
                        No Rental Growth & Increased vacancies




                        Forecasted Energy Escalation Doubled
Conclusions

• Although Level 1 & 2 upgrades are not considered attractive
 investments the cost of doing nothing could be far greater!

• Obsolescence created by tenant demand for ‘green’ office
  space has greater impact than the escalation of utility costs

• Important that you ‘Know Your Building’. Don’t be caught off
  guard holding a fading asset. Complete a full building
  assessment
Case Study// Arup Fitzrovia Stage 1, UK

   1970’s commercial office
    building
   Air con and raised access
    floor integrated within 3.1m
    floor to floor
   Double skin controls solar
    gain, heat losses and
    distributes ductwork
   Displacement ventilation
    for IEQ
   Daylight linked lighting
Case Study// 39 Hunter St, Sydney
Description: 7 story heritage office
Erected: 1916
Refurbished: 1967
Client Brief:
 PCA “A” grade
 5 star ABGR target
 High GreenStar target (achieved 6*)
 Long term view
 Increase natural light penetration

Heritage Significance:
 Classified by National Trust
 Listed in the register of the National
  Estate in 1986
 Permanent conservation order
  by NSW Heritage Council
Case Study// 39 Hunter St, Sydney
Understand the Building
Case Study// 39 Hunter St, Sydney

Respond to the Building’s natural attributes
and enhance it’s short comings
Case Study// 39 Hunter St, Sydney
Key Initiatives
   Central Atrium -natural light and
    communication
   Displacement ventilation – IEQ,
    additional height, exposed heritage
   Fire engineered
   Peak load reduction via gas fired
    generator no substation upgrade
   Recycling and re-use of existing
    interiors
   Carbon Dioxide Monitoring and Control
   Rainwater tanks for toilet flushing
   Use of sprinkler tank as a store of
    “coolth” for peak load lopping
Heritage Government Property

   Use building’s natural attributes
   Designed in 1880’s to have external shading
   Analysis shows that change to double glazing has
    negligible effect
   Most effective strategies
     Natural ventilation – including night purging
     External solar shading
     Insulation
     Draught sealing
Heritage Government Property
                                                           Summary of Performance Results
                             40

                                  Comfort target exceeded in this zone
                             35



                             30
Operative Temperature (C)




                             25



                             20



                             15



                             10



                              5



                              0

                            9/02/2002   11/02/2002 13/02/2002 15/02/2002 17/02/2002 19/02/2002 21/02/2002 23/02/2002 25/02/2002

                                        Original Performance   Improved Performance    Outside Dry-Bulb Temperature
Australia Post // Green Building Strategy


 Sustainable Buildings




                         Australia Post //
                         Green Building Strategy
Australia Post’s Property Portfolio
           Property Types - Owned    NSW/ACT   QLD   SA/NT   VIC/TAS   WA   TOTAL
           Commercial                   2       1      0        1      0      4
           GPO                          1       1      1        2      1      6
           Industrial                  47      36     16       53      18    170
           Other                        0       0      0        0      0      0
           Residential                  1       6      0        0      3     10
           Retail                      117     39     34       74      28    292
           Total                       168     83     51       130     50    482



           Property Types - Leased   NSW/ACT   QLD   SA/NT   VIC/TAS   WA   TOTAL
           Commercial                   7       2      1       12      3     25
           GPO                          1       0      1        0      0      2
           Industrial                  89      34     10       67      23    223
           Other                        1       1      0        3      0      5
           Residential                  0       0      1        0      8      9
           Retail                      151     128    38       154     62    533
           Total                       249     165    51       236     96    797
Green Building Strategy
Green Building Strategy
Characteristics/ Light Industrial (Delivery Centre)
Next Initiatives
Particularly Suited to the Light Industrial Sector

   Replace lighting               Bike park
   Reduce infiltration            Car parking
   Building user guides           Waste recycling
   Improve daylight               Community involvement
   Label light switches           Paint roof with reflective
   Economy cycle                   paint

   Set back air conditioning      Zone air conditioning
                                   Lighting timers
Don’t Forget the People…

Chinese Proverb –
Tell me and I’ll forget
Show Me and I’ll remember
Involve me and I’ll understand

Best Designed building with the
most sustainable features will
never achieve it’s best outcome
if the users don’t interact with
their building in a sustainable
way
Australia Post

   Integral to Strategy
   Staff engagement
   Building User guides
   Training
Thank you
Pippa Connolly
pippa.connolly@arup.com



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