And the demand for green properties doesn’t end there: Walker says there aren’t many large companies that don’t have a policy similar to governments. “This market segment is large – I would say around 50 per cent.” But observers should not immediately assume that environmental discipline is the primary cause of better financial returns. “You must note that this [segment] is concentrated in the high-quality end of the market, which generally performs better in any case.” Nevertheless, he says this demand for green property exerts “a significant impact” which is expected to deepen as large government departments approach lease-expiry and lift their standards. In a recent arrangement that Walker saw, a Queensland government body asserted the right to terminate its lease on a new property if agreed environmental targets detailed in the construction contract were not met. However, even though government and big business prefer sustainable properties, the rest of the leasing market displays more sensitivity to rent prices than energy efficiency, Walker says.

Has government pulled the plug on green energy? But government support of green property doesn’t end with leasing contracts. Through the $90 million Green Building Fund, the Federal Government provides generous subsidies for property managers to implement environmental improvements. Set up in 2008, the fund provides up to half the capital for approved projects priced at $1 million or less. So far, LGSS has made five successful applications for grants from the fund, which is currently accepting proposals for its sixth round of funding. But for larger, more innovative upgrades, known as “exemplary projects”, it can award more money, Churchill says. The LGSS is applying for such a grant to install a $4 million “tri-generation” energysaving system at 76 Berry St, North Sydney, which generates electricity onsite. This also produces “waste” hot water, the heat from which is then used to power the building’s air conditioning. Even though the government intends to run the fund until 2013, the current round of funding, which closes next month, will be its last, Walker says.

From then, no significant public funding for the upgrade of commercial property will be available. “The government hoped the CPRS [Carbon Pollution Reduction Scheme] would drive efficiency across markets. With this now not in place, the industry is in a bit of a ‘wait and see’ position on what impact policy will have on returns on investment in energy efficiency [in properties].” Overseas, New York’s Greener, Greater Buildings Plan was launched in late 2009 and, by 2030 aims to limit greenhouse gas emissions to 30 per cent below 2005 levels. It represents a notable government effort to improve the environmental sustainability of properties, Walker says. But the dilemma caused by government moves to encourage energy efficiency is the influence they will have on the development of new technologies and the job market. If such support is withdrawn too quickly, it effectively pulls a lifeline from an emerging industry. “Do nothing, and you will be importing technology in the future as well as losing good companies to other countries that offer greater incentives. But policies that do not effectively incentivise the markets will simply be throwing money away,” says Walker. “Unfortunately, in politics in any country, the difficulty of shortterm pressure on special interest groups and worrying about the next election can mean long-term loss. The market in energy efficiency is set to boom, and we don’t want to be a net importer,” says Walker.