Why the Australian property sector leads the way on sustainability

Australia has the most sustainable built environment in the world, according to the 2022 GRESB Real Estate Benchmark. In 2022, Oceania was positioned well ahead of the global average score of 74 with a GRESB score of 81. On top of its impressive global rankings, Australia has also created and exported a sustainability rating system of its own. NABERS, originally a state-based initiative in NSW, was so successful within Australia and New Zealand that it has since been exported to the UK.

Some of Australia’s international success can be chalked up to a competitive streak—but, of course, there are other factors at play. The reasons behind Australia’s pronounced rise in sustainable real estate are instructive, particularly as the world looks ahead to net-zero targets in 2030.

In this post, we’ll take a deep dive into why Australia has emerged as a global champion of sustainable real estate and the core learnings we can use as an Australian- headquartered company expanding into global markets.

Regulations and rating systems

Australia’s Green Building Council was established in 2002 to drive the sustainable transformation of the built environment. Its Green Star rating system began in 2003, joining NABERS and other rating systems that would help improve carbon efficiency and other key indicators in Australia’s built environment. 

NABERS, which dates back to the late 1990s, has since expanded beyond Oceania to become a truly international system of measuring sustainable progress. NABERS was created to provide a reliable sustainability measurement across building sectors, helping property owners to accurately measure and understand the environmental performance of their assets. The system provides a rating of one to six stars for building efficiencies in energy, water usage, waste management, and indoor environment quality.

The downstream impact of initiatives such as Green Star and NABERS has been an informed and ambitious marketplace on both ends. Building owners can accurately communicate the environmental performance of their buildings, and tenants can make informed decisions about where they invest and how those decisions will impact their long-term carbon efficiency goals. They also offer the ability to compare and benchmark in a uniform manner using a common rating.

Private enterprises driving change

Despite criticisms that climate-related legislation from Australia’s government has been sluggish, the commercial property sector has taken matters into its own hands. In 2005, GPT Group set a target of net-zero carbon emissions across their portfolio in Sydney, Melbourne, and Brisbane by the end of 2020. At the time, the 2020 target sounded ambitious, if not impossible. But GPT reached that target well before the deadline, saving 1.5 million tonnes of CO2 above their anticipated usage.

Others in the industry have achieved similar outperformance. Charter Hall boasts Australia’s largest footprint of Green Star-rated assets, exceeding FY25 targets for NABERS energy performance with a 5-star weighted average. Charter Hall’s Office Sector portfolio comprises a whopping 1.4 million square metres of space, 98% of which is captured within that 5-star rating. They have even proactively adjusted their net-zero carbon emissions target from 2030 to 2025. And office space isn’t the only commercial real estate in Australia to be optimised. QIC has committed to achieving net zero emissions for their Australian retail assets by 2028, and was the first Australian signatory to the World Green Building Council’s Net Zero Carbon Buildings Commitment for a retail portfolio. All three of these market leading REIT’s are long-standing CIM partners.

Davina Rooney, CEO of the Green Building Council, has noted, “In Australia, we’re seeing a lot of big and small players in our industry take great strides toward the goal of a healthier, net zero future.” While government legislation is a helpful motivator, private enterprise in Australia has raised the bar of its own accord.

Legislation has followed suit. For example, government buildings in Australia must achieve a 4.5-star NABERS energy rating. Rating requirements also exist when leasing, subleasing, or selling commercial office space over a certain size nationally, and local governments now often require a minimum NABERS rating for new developments.

Collaborative industry culture

While Australia is competitive by nature, the market is also inherently collaborative, especially when it comes to matters that impact its collective resilience and sustainability. Changing weather patterns have hit Australia hard, with higher temperatures and more extreme droughts contributing to longer and more severe fire seasons, extensive flooding, and warmer, more acidic oceans.

No one is exempt from the destructive impact of climate change, which has contributed to an incredibly collaborative culture within Australia’s property sector. In CIM’s recent webinar on The Role of Operations in Achieving Net Zero, Head of Sustainability at Colliers, Lisa Hinde, observed:

“We're continually punching above our weight when it comes to the results from GRESB. I think it comes down to transparency, and also the market here is incredibly collaborative. So when we see scores improving year on year, we see the collective group of sustainability representatives getting together and saying, ‘So what did you do that led to you getting this point?’ Or, ‘How did you achieve this and how can we do this across our other assets?’”

This degree of collaboration is internationally recognised, as CIM’s Founder and CEO David Walsh has noted. David sat for a time on the Green Star Advisory Committee, where he saw firsthand the degree of cooperation between leading REITs, FM companies, and other industry players. Australia has a competitive national spirit, yes—but they pull together when it matters most.

Data-driven approach

You’ve probably heard the mantra, “You can’t manage what you don’t measure.” Australians have taken this axiom to heart with a data-driven approach to optimised building operations. In fact, many leading professionals in the sustainable property sector (Davina Rooney and Dave Walsh among them) bring with them backgrounds in engineering and computer science.

In Australia, the interest lies in measuring performance and monitoring operations to inform major decisions about how to allocate capital expenditure, reducing waste even further. CIM’s PEAK Platform offers numerous examples of customers optimisation of existing plant and equipment performance rather than rushing to replace it, which has yielded significant gains for the likes of Charter Hall and GPT Group. In one recent instance, a client realised a 33% reduction in energy use when PEAK flagged overnight equipment operation—all addressable with zero capital expenditure.

With an approach firmly rooted in data-driven decision-making, CIM and other industry leaders have improved efficiency, sustainability, and tenant comfort without sacrificing the financial goals of property owners and investors. Building owners can realise significant gains through fine-tuning existing assets and making constant incremental improvements to performance.

Green financing

Australia’s real estate industry is also a global leader in green financing. This is due in part to the success of rating systems like NABERS and Green Star, which provide an objective way to help investors understand the sustainability performance of property assets. With standard ratings firmly in place, investors can easily compare assets and decide where to responsibly direct green funds.

The success of green financing helps explain why more than half of the largest commercial property management companies in Australia have climate goals that are fully or closely aligned with 2050 net-zero targets. Strong investor interest in ESG data and sustainability has put real capital behind these targets, as evidenced by GRESB’s recent growth. GRESB now covers US$6.9 trillion of real estate assets under management, up from US$5.7 trillion in 2021.

The Australian government is also working on changes to the Corporations Act that will allow the Accounting Standards Board to incorporate sustainability standards into corporate governance guidelines. This shift toward a level playing field, in which all property firms face a standardised system of measurement, may lead to the development of an even more consistent way to access green financing.

Conclusion

According to a recent report from McKinsey on ‘Six New Imperatives for Real Estate Players,’ the success of real estate investors and operators now hinges upon the adoption of six defined imperatives. One of those imperatives is this: ‘Embrace sustainability as an opportunity, not a compliance process.’

Australia has certainly embraced the opportunities in sustainability initiatives, and its position as a world leader in green real estate is tangible evidence.

As a sustainability-focused company founded and headquartered in Australia, we at CIM are incredibly proud of Australia’s standout performance on the global stage. We have worked hard to bring our unique approach to building analytics to property owners in the UK, Asia, Europe, and the United States. We hope to continue expanding our knowledge and our reach as we collaborate with our customers to achieve global net-zero targets.‍

Targeting Net Zero by 2025, 2030, or beyond? download our free Roadmap to Net Zero ebook, which outlines the five key strategies for building a sustainable commercial portfolio.