The total occupied space for office buildings in Australia is estimated at approximately 21.0 million square metres (sqm). While government offices account for 21.9 percent of this total office space, the majority (78.1 percent or 16.4 million sqm) is commercial office buildings. The global financial crisis and more recent weaker economic conditions have severely affected investment in the Australian commercial building market. The market expects a return to trend economic growth in 2012-2013, underpinned by further growth in tenant demand. Apart from limited new supply, low vacancy levels are expected, particularly for prime grade offices (which are the most environmental friendly commercial buildings). This presents considerable opportunity for rent rises for owners and investors. Despite the strength of the Australian dollar, offshore investors continue to show strong interest in the Australian commercial property market. In terms of pumps used in office buildings, the refurbishment market is expected to be the key driver for pumps market revenue growth in the near term because investments in new office building construction is likely to be below trend in 2013-14.
The Green Building Market
Commercial and government office space across the country account for 10.0 percent of Australia’s greenhouse emissions. This makes the office building sector a key area of focus for improving environmental outcomes at a total level.
The property industry in Australia has witnessed significant developments in relation to sustainability in recent years. This has been driven at all levels—the individual property level, as well as the corporate and the external environment level (e.g., legislation, standards, government incentives, environmental costs, and customer demand).
Australia’s Commercial Building Disclosure program commenced in November 2011. According to this program, all sellers and lessors of office space of 2,000 square meters or more are required to obtain and disclose a current Building Energy Efficiency Certificate (BEEC). Such a certificate allows the NABERS Energy star rating for the building, general energy efficiency guidance, and an assessment of tenancy lighting in the area of the building that is being sold or leased. As a national program, the goal is to improve the energy efficiency of Australia’s largest office buildings. It also provides more transparency to make informed decisions while renting office space.
The establishment of green building rating schemes in Australia has been a key success factor of the green building agenda. The “Green Star” and “NABERS” rating schemes are the two major key initiatives to evaluate the environmental design and environmental performance of office buildings. They encompass a range of office building criteria, cover various property types, and are comparable to the international green building benchmarks in the U.S. and the U.K.
Both rating schemes have been actively supported by the property industry in Australia and have, over time, transformed Australia’s property and construction markets.
A ‘rated’ building is considered “premium” office accommodation, and is more likely to deliver benefits such as a higher return on investment, reduced vacancies, and higher face rents (the quoted rent before taking into account incentives or increases).
Opportunities for the pump industry
The addressable opportunity for pump suppliers to office buildings is typically across applications such as water boosting, circulation, drainage and waste, fire fighting as well as metering or dosing.
The ongoing challenge of high price sensitivity among customers in the building services industry is expected to lead to more competitive pricing by pump manufacturers.
However, key office building trends translate into specific drivers of pump market demand. For example, recycling and reuse of water in office buildings helps drive demand for booster pumps for water transfer as well as metering pumps for chemical dosing (to treat water). Reduced town mains pressure may spur demand for larger fire fighting pumps. Increased focus on occupational health awareness will boost demand for metering pumps for dispensing chemicals in cooling towers. Retrofitting HVAC systems to raise ‘green’ performance will drive demand for more energy-efficient circulator pumps. Right sizing of motors and minimization of leaks (as part of overall system efficiency improvement) will help grow service revenues for pumps across most applications.
In fact, there is a significant opportunity to educate and engage customers on the criticality of regular and appropriate maintenance of pump systems. This service market has considerable untapped potential since the frequency and adequacy of pump maintenance in office buildings is currently well below optimum levels.
The shift to activity based workplace design and ‘smart buildings’ will eventually lead to increased demand for intelligent pumps. In 2012, the median workspace ratio for office buildings was around 14.0 sqm per person across Australia, down from 17.6 sqm in 2008. The push to improve workspace efficiency and smarter workplace design – particularly open plan formats – is the prime driver for this decreasing trend. In the context of the drive for improved efficiencies, pumps that provide increased energy savings in buildings are likely to see increased demand. Although the initial cost of installation of energy efficient pumps is high, it is more cost-effective for end-users as the life cycle costs are significantly less, particularly as the price of traditional sources of energy continues to increase. The focus on efficiency is expected to be more on the whole system, rather than just the pump components. Increased demand for energy efficient pumps will result in pumps designed with more electronic features that would enable better system integration and system efficiency.
This Market Insight was authored by Ivan Fernandez, Industry Director, Australia & New Zealand, Industry Practice, Frost & Sullivan. For media enquiries or more information, please email email@example.com