Aussies Sustaining Australia
Speech by Lesli Berger, General Manager of Fivex Commercial Property, 6 November, 2006.
Introduction
Ladies and gentlemen, my name is Lesli Berger and I am the General Manager of Fivex Commercial Property.
There are a couple of key questions I will attempt to answer during the course of my speech.
Why aren’t all new developments sustainable?
- Sustainable development costs more to build than a conventional building. To illustrate this point, out of our total construction costs of $5 million about half a million was directly attributable to the environmental systems we’ve employed. That’s a 10% premium that most private property developers simply cannot afford.
- Because Governments merely pay lip-service to sustainable development. From my experience, when it comes time for local or state government to put some money on the table, they are not prepared to do so. Let me illustrate by using two of the key obstacles we faced in our development at Double Bay.
a- Probably the most significant thing we have done to reduce CO2 emissions from our development is not provide on-site parking spaces. As a result, Woollahra Council have levied a $1.3 million s94 contribution on us for a lack of on-site parking, in our case it amounts to a 26% development tax. We said to Council, your policy is unsustainable and put forward a sustainable car sharing proposal for the whole communities benefit. Woollahra Council rejected our proposal because they were not prepared to part with the $1.3 million. And people say developers are greedy!
b- The other obstacle we faced was with Energy Australia. Energy Australia have forced us to provide to them free of charge 40sqm of prime retail space so they could build an electricity kiosk to service the energy needs of the rest of Double Bay. Energy Australia did not take into account that we were prepared to install a gas fired air conditioning system so as to ensure our sustainable development of 4 storey’s used no more energy than the previous building on the site which was only 1.5 storeys. Energy Australia ignored the environmental benefits to be gained and insisted on the installation of the electricity kiosk on our property. The cost to our project of the loss of 40sqm of prime retail space is about $700,000 or a further 14% of construction costs.
In total we were forced to pay 40% development taxes on a sustainable development. And people wonder why more developers don’t go sustainable!
Are end users prepared to pay more for sustainable development compared to conventional buildings?
No. There is a clear market failure in that end users who benefit from the installation of sustainable technologies that minimise water and power consumption are not prepared to pay for those savings to the person who pays for their installation: the developer.
How can we redress the market failure and encourage developers to go sustainable?
- Remove significant barriers put forward by state and local government to actually achieving sustainable development:
- Critically, Governments must devise a system of incentives to make it more financially profitable for developers to build sustainable developments as opposed to conventional buildings.
Thank you for your time.