MEASURING THE PERFORMANCE OF OFFICE BUILDINGS

Transcription

1 MEASURING THE PERFORMANCE OF OFFICE BUILDINGS 13 June 2017 Anthony De Francesco Founder and Director of RIA 1

2 Outline ❶ Introduction ❷ Performance measures ❸ Summary 2

3 Outline ❶ Introduction ❷ Performance measures ❸ Summary 3

4 Structure of the Australian property market: office sector is significant part of the market 4

5 The property office sector: segmented by type and grade AUS property office by type value as at March 2016 AUS property office by grade value as at March 2016 Office: Non-CBD, 20% Premium office, 35% Office: CBD, 80% Secondary Office, 10% A-grade office, 55% Source: RIA. Source: RIA. 5

6 Measurement axioms for green information tools that feed into investment strategy AXIOM MEASURE DIRECTION Space Ownership (Investment performance) Investment return Pricing measures Rental levels & growth Strengthen returns with improved profitability Tighter asset pricing with lower risk premia More robust rental growth Space Utilization (Occupational productivity) Vacancy rates WALE Productivity measures Better tenancy retention Longer leases Improved workplace productivity Space Management (Operational efficiency) OPEX - Operating expenses CAPEX capital expenditure Lower running costs: both labour & technology Better use of capex: lower maintenance capex STRATEGY Asset level Portfolio level Fund level 6

7 Outline ❶ Introduction ❷ Performance measures ❸ Summary 7

8 A snapshot of relative performance measures for Green-star rated office buildings AUS: Green Star vs All Office annualised results for period to Dec 2014 Capital value in $/sqm 23% Capitalisation Rate -0.3pts Net Income in $/sqm 20% Opex in $/sqm 9% Capex in $/sqm -43% Vacancy Rate -4.3pts WALE in years 22% -50% -30% -10% 10% 30% Source: MSCI 8

9 Return performance for Green-star rated office buildings Returns: all office versus Green-star rated office annualised returns as at March Y 5YA 1Y 5YA 1Y 5YA 1Y 5YA 1Y 5YA All office All Stars 4 Star 5 Star 6 Star capital return income return total return Source: MSCI, RIA 9

10 Need to consider the influence of the investment market cycle: if in upswing or downswing mode 25% AUSTRALIAN ALL PROPERTY RETURNS ANNUAL RETURNS ON QUARTERLY PERIODS 20% % 10% % 0% -5% -10% -15% Sep 2006 Sep 2007 Sep 2008 Sep 2009 Sep 2010 Sep 2011 Sep 2012 Sep 2013 Sep 2014 Sep 2015 Sep 2016 Income Return Capital Growth Total Return Source: MSCI 10

11 NABERS Selected performance measures across selected CBD office markets RESULTS FOR THE 12 MONTHS TO JUNE 2016 TOTAL RETURN CAP RATE VACANCY WALE 4 to 6 star Sydney CBD Melbourne CBD Brisbane CBD Perth CBD GREEN STAR 4, 5 & 6 star Sydney CBD Melbourne CBD Brisbane CBD Perth CBD ALL AUSTRALIAN OFFICE Sydney CBD Melbourne CBD Brisbane CBD Perth CBD Source: MSCI 11

12 Need to consider intrinsic diversity of CBD markets 25% RETURNS ACROSS AUS CBD OFFICE PROPERTY MARKETS ANNUAL RETURN 20% 19.4% 17.7% 16.2% 15% 14.9% 13.4% 13.2% 14.0%13.4% 10% 9.9% 9.4% 5% 0% -0.4% 0.7% -5% -10% capital return income return total return J16 S16 J16 S16 J16 S16 J16 S16 J16 S16 J16 S16 Total Office SYD MEL BRI PER CAN Note: J16 refers to Jun 2016 and S16 refers to Sep Source: MSCI 12

13 Cycle performance varies across asset grade submarket RETURNS ACROSS VARIOUS CBD OFFICE PROPERTY MARKETS ANNUAL RETURN 23% 21% OFFICE TOTAL RETURNS 25.0% TOTAL RETURN 16.0% TOTAL RETURN 19% 20.0% 14.0% 17% 15% 15.0% 12.0% 10.0% 13% 11% 10.0% 8.0% 6.0% 9% 5.0% 4.0% 7% 2.0% 5% Sep 2014 Mar 2015 Sep 2015 Mar 2016 Sep 2016 Sydney CBD - Premium Sydney CBD - Grade B Parramatta Sydney CBD - Grade A North Sydney 0.0% Sep-14 Mar-15 Sep-15 Mar-16 Sep-16 Melbourne CBD Premium Melbourne CBD Grade A Melbourne Non-CBD 0.0% Sep-14 Mar-15 Sep-15 Mar-16 Sep-16 Brisbane Prime Brisbane Secondary Brisbane CBD Brisbane Non-CBD Source: MSCI 13

14 Performance varies across asset quality grade 16 Returns: all office versus NABERS energy rated buildings annualised 5 year returns to March All stars 0-3.5s 4-6s All stars 0-3.5s 4-6s All stars 0-3.5s 4-6s All stars 0-3.5s 4-6s Prime Secondary CBD non-cbd capital return income return total return Source: MSCI., RIA 14

15 Vacancy Rate (%) CAP RATE (%) Evaluating risk for green office property portfolios High risk assets with less stable income stream 14.0 Selected office property markets values as at Dec 2014 High risk assets with less stable income stream 8.0 Selected office property markets values as at Dec AUS NABERS Energy Stars 7.8 AUS Secondary Office 10.0 AUS Secondary Office 7.6 NZ All Office AUS NABERS Energy 4-6 Stars NZ All Office AUS NABERS Energy Stars NZ Green Star AUS All Office AUS Prime Office AUS Green Star NZ Green Star AUS NABERS Energy 4-6 Stars AUS All Office AUS Prime Office AUS Green Star WALE, WALT (years) Low risk assets with highly stable income streams WALE, WALT (years) Low risk assets with highly stable income streams 15

16 Outline ❶ Introduction ❷ Performance measures ❸ Summary 16

17 Take away points Important to have clear performance measures to evaluate the influence of green initiatives. Such measures will support investment strategies. There are a variety of performance measures which evaluate investment, occupational and operational performance. Performance measures based on PCA/IPD Green Index provide evidence of green-rated buildings outperform non-rated buildings. However, these measures are highly influenced by market type, market quality, market location, and market cycle. Importantly, when formulating green policies, one needs to take into consideration individual market characteristics and features. 17

18 Thank you Contact Anthony De Francesco