Environmental IQ

Green building helps retain tenants at higher rent/

LAST July, Shane Quinn wanted to make a green statement.

Katherine Jimenez: The Australian, April 22, 2010 12:00AM

He draped the entire facade of his 22 King William Street building, acquired just a few months earlier, in fake green grass for more than a month.

It was a gimmick to draw attention to green buildings and to trumpet the fact he was undertaking a multi-million-dollar green refurbishment of the building.

At that time the building had a 1.5-star rating under the National Australian Built Environment Rating System (NABERS).

” It was to draw attention to the fact that the building is going green and to get it out to the market that we were very serious about what we were trying to do,” said Mr Quinn, the managing director and co-founder of MWQ Properties Pty Ltd.com

The timing of his decision to go green was crucial.

The Adelaide office market was in a slump because of low tenant demand and the global financial crisis. Mr Quinn also faced the prospect of losing the building’s key sitting tenant, the National Australia Bank, which was looking for space to meet its environmental criteria.

So the former civil engineer decided to go green and committed to converting the building to four-star-plus NABERS ratings. “We (saw) it as an opportune time to go counter-cyclical,” he said.

Because the Adelaide office market had predominantly a state-based tenancy, he also felt comfortable the state government was going to continue to lease and would look for green buildings in future.

Subsequently, NAB re-signed for about 11 years.

Although NAB handed back four floors, Mr Quinn was able to secure a significant rent increase.

The bank’s rental bill increased from $185 per sq m net to just over $355 per sq m net.

He believes that without the green refurbishment, the group would have lost NAB as a tenant and would have been left with a vacant building.

Since the refurbishment, the number of inquiries had increased, he said. Tenants also were more realistic about the commercial values of such space and what they were willing to pay.

NAB is due to hand back the unwanted space in June, but negotiations are in train with other potential tenants to lease the remaining space. One is the state government, which is looking to lease two floors.

“We could be full virtually in the next two weeks and we haven’t really started hard marketing,” said Mr Quinn.

“We’ve got the government, a publicly listed company, and JBWere looking at taking out all the balance of the space.”

Mr Quinn got a taste for property early in life. His parents were involved in residential land sub-division. He worked on apartment developments in Europe in his early 20s. On returning to Australia, he bought his first commercial office building in Melbourne — a 13-storey building at 51 Queen Street — in partnership with a couple of other investors.

In late 2007, at the peak of the commercial property market, Mr Quinn and his partners sold the building. “We couldn’t see any value-add in holding the building so we went to another market where we could see value,” he said.

That market was Adelaide, mostly because the value of buildings per square metre was much lower than elsewhere in Australia.

They soon acquired 100 King William Street for around $65m, and almost a year later acquired the 22 King William Street property for about $22m.

Mr Quinn said going green was pivotal for building owners today in securing tenants, especially socially responsible corporates.

“If you don’t have an environmental policy . . . you are going to struggle to get work from people like NAB and it’s going to feed down the food chain,” he said.

“It’s one of the major reasons why we are investing in getting all of our portfolio up to at least four and a half stars.”

Mr Quinn said he remained in “acquisition mode”. He bought another office building in Sydney’s Parramatta last year and was in talks to buy three other buildings, one each in Canberra, Melbourne and Sydney.

The next step was setting up an unlisted property trust. “I see that as the way forward for me at this stage,” he said