IEQ as important as NABERS in commercial lease negotiations

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Indoor Environment Quality (IEQ) is now considered so important for effective staff performance, it is earning a place beside NABERS Energy in lease negotiations. NABERS Energy ratings are now a common feature of commercial leases and for good reason.– they provide insight into both the building owner’s commitment to the environment and the tenant’s future energy bills. However, while a high NABERS Energy rating is certainly worth looking out for, there are other indicators that may be just as useful for tenants when evaluating a potential office space.

The quality of indoor office environment is becoming increasingly important owing to new office trends such as activity-based workspaces, hot desking, increasing worker mobility and a growing familiarity with productivity research.

NABERS Energy ratings have risen to prominence because energy consumption is easy to measure, and quantifying the benefits of energy efficiency is relatively straightforward. On the other hand, the benefits of good indoor environment quality (IEQ) may have more importance to a tenant’s business, as good IEQ has been linked to employee health, comfort and productivity. And since these ‘soft benefits’ are much harder to measure, IEQ has received far less attention than it deserves.

Comparing IEQ
There are several systems available to objectively measure indoor environment quality, most notably the Centre for the Built Environment’s Post-Occupancy Evaluation, and the US Health Optimisation Protocol for Energy-Efficient Buildings (HOPE). However, NABERS, as well as providing a tool for rating the energy performance of buildings and tenancies, also provides three other tools for rating performance with regards to water, waste and the indoor environment – NABERS IE.

There has been a rapid uptake in the use of NABERS IE in the past few years. It has some advantages over other tools in the sector. First, the data set for NABERS IE is based on Australian data. Second, the rating is determined through data from objective measurements, supplemented by an occupant survey. This enables a cost-effective assessment that comprehensively tackles these five factors:

  • thermal comfort, including temperature, humidity and air speed
  • indoor air quality, including ventilation and levels of pollutants
  • acoustic comfort levels, including the ability of a building to minimise external noise as well as the noise levels within the tenanted space
  • lighting, compared to optimum task performance levels, and
  • office layout, including the spatial arrangement of walls, partitions, furniture and equipment in relation to fixed elements such as windows and HVAC.

What is it about thermal comfort, air quality and light that affects worker productivity?

Thermal comfort and productivity
A Cornell University study – ‘Linking Environmental Conditions to Productivity’ – used an insurance office data collection agency in Florida and studied keystrokes and errors. At US$16 per hour wage, the lost productivity can be up to US$2 per hour, from US$1.40 to US$3.40 or 12.5 percent. The same study found that when the temperatures were as low as 20 degrees Celsius, employees made 44 percent more mistakes than at optimal room temperature (24.5 degrees Celsius). (see table above)

  • Stable room temperatures are core to an occupant’s sense of well-being
  • A one-degree Celsius drop in core temperatures increases the risk of infection by three-fold, affecting the immune system, digestion and thought processes which is why studies on office health have focused on maintaining warmth


Individual versus group comfort
An international standard for statistical comfort prediction (ISO7730) was created nearly 40 years ago. It introduced a new metric – the PMV index – as a seven-point scale from cold (-3) to neutral (0) to hot (+3). A formula was generated based on statistical data collection and it is still used today by prominent HVAC designers.

A modern Australian or US office typically fits within a PMV of +/-0.75 while a European office usually has a higher standard a PMV of +/-0.5.

What remains a great challenge to staff health and productivity is that there is not one environment that fits all. Each human body has slightly different preferences for staying comfortable, dependent on levels of hydration, fitness, clothing levels and medication etc. These are factors that a landlord will correctly insist they have no control over. Yet in a knowledge economy, providing a comfortable environment remains essential to competitive advantage. This is why the NABERS IE rating tool also uses a subjective occupancy survey component, as well as objective technical measurements.

Indoor air quality and productivity
Indoor air quality (IAQ) has always been an important health concern and focus for research. The expression ‘Sick Building Syndrome’ (SBS) was first coined by the World Health Organisation in 1983 to describe symptoms such as headache, lethargy, eye, nose and throat irritation, breathing problems and skin irritation experienced by office workers in poorly ventilated buildings.

While it has proved hard to establish conclusive evidence between chemical and particulate exposure at work and the physiological reactions associated with SBS, health professionals and researchers agree on the following points:

  • problems can occur for occupants with long-term exposure to poor room air quality perceived as clean
  • the symptoms may not be immediate, but may develop over time, and
  • not everyone reacts the same way to pollutants and irritants.

The Indoor Climate and Productivity in Offices guidebook outlines two conclusions: first, doubling the outdoor air supply rate can reduce illness and the occurrence of SBS by roughly 10 percent and increase office work output by roughly 1.5 percent and, second, every 10 percent reduction in the percentage dissatisfied with air quality can increase the performance of office work output by roughly one percent.

Lighting and productivity
Light plays a critical role in regulating the human body clock, affecting sleep patterns, activity levels and quality of life. For this reason, daylight and view are associated with improved mood, enhanced morale, lower fatigue and reduced eyestrain.

As over 90 percent of information is visual and office workers spend long periods staring at computer screens, which are at a fixed distance, office workers are particularly susceptible to eyestrain, which is the number one health problem in offices. The integration and management of daylight and artificial light in an office building provides the best spectrum of light for the eye. When the eye is allowed to refocus to different distances, eyestrain is diminished.

Indoor lighting benefits are so great that many countries in Europe require that office workers be within eight metres of a window.

The productivity equation
The productivity equation is the cost benefit analysis of productivity-based investments. Research predicts a three percent productivity gain for tenancies where there is 50 percent more fresh air than minimum code requirements. This small productivity gain is typically worth $180 per square metre per annum to the tenant, but it costs the landlord $1.25 per square metre in extra energy if their building is usually assessed with a five-Star NABERS rating.

When conducting productivity assessments, it is important to determine the daily rate of an employee. In Australia, it is typically $500 per day.

Synergies and challenges with NABERS Energy in leases
In the previous example, the ‘50 percent more fresh air’ represents a potentially lease-threatening drop in NABERS rating (nominally one star in Brisbane, 0.5-star in Melbourne and 0.7-star in Sydney). This is one example of how leases written with an emphasis on NABERS Energy can discourage the landlord’s acceptance of IEQ measures that tenants may appreciate. Other examples include more closely controlled comfort settings or more responsive HVAC systems.

Though there are opportunities for synergy – improved shading or blinds can improve both comfort and energy. Lighting controls (such as Organic Response) that permit daylight when available can improve the sense of well-being as well as reduce electricity bills.

Task-ambient lighting and air-conditioning generally allow targeted delivery of services with a lower average intensity lighting or air-conditioning. For example, lighting control can allow lamp output to drop by 30 percent. This permits a higher proportion of daylight, which has a much healthier outcome for staff. Task-ambient systems can enhance the landlord’s bottom line and NABERS scores.

Trends that affect IEQ and productivity
The speed with which information can now be shared – instantly and on a large horizontal scale – is causing tidal waves of change in many institutions that have enjoyed relative stability in the past. The consequence for commercial office space is that people now work in a networked environment of constant connectivity and structural churn.

This is the ‘new normal’ and it embraces challenges such as globalisation, outsourcing, the growing complexity around technology, competition for talent and virtual teams. Workspace design is responding with increasingly flexible arrangements such as activity-based working, hot desking and mobile offices. Working in places of such change, the human body is placed under greater stress than experienced before, as people struggle to adapt.

Other considerations include worker mobility. A 2003 Lincolne Scott survey of 550,000 square metres of Brisbane office space found that, on average, desks were only occupied for 29 hours per week. The same study found that people were hired to work for an average of 40 hours per week, and landlord systems typically operated for 58 hours per week. This means that nearly half of the time unoccupied spaces are being lit and air-conditioned.

The challenge for FM is how to best describe and contract a method of operating air-conditioning and lighting that best suits the tenant without diminishing the asset value for the landlord.

Businesses are increasingly embracing dynamic new approaches to the way they occupy their office space. When planning their upgrades, office owners need to consider these changes and consider ways of delivering lighting, cooling and fresh air that will maximise indoor environment quality as well as energy efficiency.

Landlords also face certain challenges including the changing impact of weather severity on the facility. As tenants become more aware of productivity-based products, there may be common ground in broadening workplace leases to simultaneously address the concerns of both landlords and tenants.

Leases that go beyond NABERS Energy to also include NABERS IE are a suggestion. The success and prominence of the NABERS Energy rating tool is not just because energy is easy to measure. It is also a testament to the structure that supports and administers the scheme. The independence and repeatability of assessment allows credible comparisons of energy between tenancies. NABERS IE will bring the same credibility to IEQ comparisons and allow tenants to make an informed choice between tenancies.

To position a building in the best possible light, facility managers must focus on the following ‘low hanging fruit’:

  • Conduct sample ‘offline’ NABERS IE assessment to determine how various spaces in the building currently perform.
  • Arrange regular commissioning and calibration audits.
  • Ensure filtration is monitored and maintained at its highest quality.
  • Conduct sample particle counts and review whether filtration is most appropriate for tenancy.
  • Conduct sample carbon dioxide readings for air quality assessments.
  • Support tenancy designs that use task-ambient strategies.
  • Review comfort stability and assessments (via temperature readings or surveys).

The role of a facility manager in modern workplaces is more complicated than ever. The ‘new normal’ requires that facility managers enhance their building’s ability to furnish a productive internal environmental quality.

Rob Lord is the managing director of Seed Engineering.

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