Deep carbon fears of a shopping centre king

Shopping centre magnate John Gandel is one of the 10 richest people in Australia but he has barely uttered a word in public for more than a decade. This week he finally broke his silence to declare his ‘top priority’ is not the threat of online retailing or the high dollar… actually it’s the carbon tax.

And because Gandel is worth $3 billion and owns a chunk of Charter Hall, Colonial First State Retail Trust, half the nation’s biggest shopping centre (Chadstone, Melbourne) and has links with the Sussan and Sportsgirl fashion stores, the retail and property sector will take him very seriously indeed.

Public attention surrounding the introduction of the carbon tax on July 1 has centred squarely on power producers and miners. On Monday NSW power generator Macquarie Generation – the largest carbon emitter in Australia – confirmed the worst fears of many when it wrote off $800 million from its asset valuations.

But it is property, specifically the nation’s air conditioned shopping centres, which are next in the firing line.

What’s more, unlike prime office buildings where prestige tenants will pay more to reside in 'green buildings’, Milton Cockburn, chief executive of the Shopping Centre Council of Australia told Business Spectator retail tenants simply won’t do so. 

So very soon what’s going to happen in the Gandel empire and at many more centres is that carbon tax-driven electricity price rises are going to get passed on to tenants, which in turn will further squeeze margins.

Worse still, major tenants such as Woolworths or Safeway will escape the initial impact due to the special arrangements those key lessees enjoy. Rather it is ‘specialty retailers’ – the legion of fashion and food stores that make up the bulk of retail selection at shopping centres – which will be hit first.

Shopping centre landlords like Gandel already know the carbon tax is creating winners and losers in related areas of commercial property. A report from the Australian Property Institute earlier this year found that in the city of Canberra office buildings with a top green rating had a 21 per cent premium to the market while those with low ratings had a 13 per cent discount. These are big variables in a low growth market. In the shopping centre sector the changes are coming so fast the analysts have yet to do the numbers.

Gandel rival Westfield has made some effort to get on the front foot – the new Westfield centre in Sydney CBD has achieved a six star green rating... one of the first Australian shopping centres to do so. But more typically, Westfield is going to pass its carbon tax costs down the line: last month the group said it would impose a "carbon emission related charge on lessees at cost" – the charge apples to 12,000 retail outlets across Australia.

Ultimately, it is inevitable that the higher carbon-related costs will hit not just tenancy expenses but the actual asset valuations of shopping centres and that will hit John Gandel’s bottom line… no wonder the man recently described as "reclusive" felt it was time to say something.

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Just thinking of all that roof space on shopping centres that could be used to generate solar power (Deep carbon fears of a shopping centre king, April 20).
This impost, which will drastically change our living standards, is not to be taken lightly (Deep carbon fears of a shopping centre king, April 20).
Perhaps it is a necessary evil but the dubious reason for its hurried implementation in clear contrast to the global emissions reduction agenda leaves much to be desired from a minority federal government so close to the end of its term.
Air conditioning is the simplest demand to manage; doing so through cold water storage reduces energy consumption, peak demand (with the massive cost onflow to others) and provides a way of storing solar power (Deep carbon fears of a shopping centre king, April 19). So my sympathy as an energy engineer for owners who have resisted DSM for all these years – zero.
How many of the above have read Donna Laframboise's extensive critique of the IPCC that exposes so much of the fraudulent claims that our government takes as holy writ (Deep carbon fears of a shopping centre king, April 20).
This "carbon tax" debate is a fraud, it has been poorly put and the few who take a contrary position are lambasted with great vigour. Stop the whole nonsense and allow views to be fairly put. This has not happened and we are now lurching towards a tax that in the main will do damage but change nought. Spectacular madness but let's not offend the "Greens".
I will have to live with it like I have the automatic inflation adjusted GST (Deep carbon fears of a shopping centre king, April 20).
Seems some now can't avoid this tax.
To those who are suggesting putting solar panels on roof spaces (Deep carbon fears of a shopping centre king, April 20):
1) Who do you think will pay for the cost – the tenants and then the consumer.
2) How can we have natural light and ventilation if the roof space is covered with solar panels.
3) The cost of generating solar electricity/KW is far higher than coal powered electricity
4) You couldn't put enough solar panels on a roof space, particularly in a multi-story building, to produce sufficient electricity to power the whole building.
The point in the article is that:
1) It is not only the 'big polluters' who will pay, we all will (so another Gillard and co lie).
2) Most retailers, particularly the small retailer who according to the article are the most seriously at risk, are already functioning on very small profit margins. Many have already reduced costs largely by reducing staff numbers and additional costs will only add to their difficulties and they will either shed more staff or go out of business, hence there will be more people unemployed.
As for generating their own power via gas, diesel, etc. Are you kidding me? Imagine if every shopping centre built its own power plant! Efficiencies of bulk, etc, go out the window, costs would skyrocket and the carbon footprint would become greater – besides the Greens want wind and solar not fossil fuels (gas or diesel) – and where would the gas come from? Surely you are not suggesting that we use shale gas?! Oh my! The Greens would love that
Carbon tax-wealth redistribution and Labor philosophical, nice to do but not affordable (Deep carbon fears of a shopping centre king, April 20). The shopping centre kings best enjoy it wile they can because the party is over. Tenants will disappear and those that stay will be working for a mere pittance of a wage. The big shopping centres contributed to the demise of the neighbourhood stores much like Woolies and Coles that squashed the small grocers etcetera. So I say suck it up, game over Gillard and the Greens with one fell swoop have killed the game. End of story.
Heading should read ' Carbon Tax achieving objective'. (Deep carbon fears of a shopping centre king, April 20.)
If it was not introduced there would be no reason for landlords to make their buildings more energy efficient.
Power has for too long been a cheap commodity in Australia relative to world rates, and we've taken it for granted, just like we did with petrol prior to the 1970s.
The formula for passing on costs to retail tenants is very established (Deep carbon fears of a shopping centre king, April 20). Building pays more for "outgoings", then this gets added onto the bills of tenants, without incentive on the landlord to control costs.
A real fear here is the internet and retailers now faced with higher costs competing against online stores in other countries that do not have a carbon tax. I believe this is what John Gandel is fearing although he does not want to name it specifically.
Unfortunately, what Don (April 20, 7.14am) does not realise is that shopping centres do not fall down, they turn into ghettos or at least parts of them may (Deep carbon fears of a shopping centre king, April 20). I rent commercial and residential property so I am very aware of the current situation. Also, what most people don't seem to realise is that as commercial property decreases in value, Why buy or rent an expensive house/apartment when you can live in a groovy shop (permissible in business 1 zoning) – it is a chain reaction to decreasing residential property values, which is not 'as safe as houses as it was!
As a few commentators have indicated, there is little indication that the carbon tax will actually have any impact on the amount of carbon emitted – it is just another tax that will flow through the economy (Deep carbon fears of a shopping centre king, April 20).
Smaller retailers will be faced by higher retail rents, while at the same time the middle class – the drivers of retail spending – will have less money in their pockets. The first impact will be on discretionary spending, because, in general the process of consumers reducing their energy bills is a slow one, due to the high capital cost of implementing energy efficiency measures. Because consumers can only slowly change their utility bills, this means that they will first have to curb discretionary spending. As a result the carbon tax becomes an assault on retail and hospitality, since discretionary spending is the easiest place for consumers to find cost savings quickly.
If entire villages in Germany can adapt to run off (non-taxable) renewable power in a relatively short space of time, why can't a collection of shopping centres? (Deep carbon fears of a shopping centre king, April 20.) A market mechanism to address this issue has been in the pipeline for quite some years now. It's not like it's just snuck up and caught industry leaders by surprise.
Interesting the article notes that top green buildings in Canberra have a 21 per cent premium – as if tenants are going for them for the savings (Deep carbon fears of a shopping centre king, April 20). Omitted in the report is that one of these tenants is the Department of Climate Change. And to pay for this the government is using other people's money.
Outside of the Department of Climate Change, any business that goes for the top green rated premises do it for prestige reasons not the savings. Also, these businesses are loaded with profit.
You can actually rent solar arrays now instead of paying the large up-front costs (Deep carbon fears of a shopping centre king, April 20):
http://www.smartplanet.com/blog/intelligent-energy/solar-startup-sungevity-bring-solar-leasing-to-australia/15076?tag=nl.e660
To all those advocating solar. Solar costs about 10 times as much as electricity generated by coal so that's obviously not an option (Deep carbon fears of a shopping centre king, April 20). Comments are usually rather well informed on this site so it's a little weird.
I can remember when there were no shopping centres (Deep carbon fears of a shopping centre king, April ). Friendly personal service, variety, lots of independent retailers, walking down the high street, etc. Now we have noisy, smelly, pedestrian unfriendly crowded shopping centres with mediocre chain stores with surly ignorant casual staff all selling the same stuff. If the shopping centres can't survive under the carbon tax, I say "good riddance".
Firstly, Mr Gandel may well be talking through his pocket but that does not mean he speaks with forked tongue! (Deep carbon fears of a shopping centre king, April 20.)
The carbon tax is going to cost everybody money. Lucky (or selfish) organisations will recoup the expense from others. The bulk of the population will pay.
Secondly, spending tens of thousands of dollars on energy saving schemes is beyond the ability of a huge proportion of the community, so glib comments such as "what I've done" or "what you should've done" are less than helpful.
Thirdly, whether climate change is fact or fantasy, we need to accept that we are slowly destroying the earth. Excuse me for noticing guys, but the "clean burning" gas you are proposing we use instead of "pollutey old coal", took just as many millions of years to make. When it's gone, it's really gone. We need to address the fact that we are destroying the only earth we have.
The billions being squandered on the NBN could have been poured into alternative energy development such as hi-temp (molten salt) solar. Instead, we get a new telephone line!
With regard to "Green Buildings", one of our major parcel delivery organisations moved large numbers of staff to new "Green" premises. They then discovered that there was insufficient power for all their computers, so the staff are now occupying two separate buildings, (the new and the old) with the extra rental, power use and general inconvenience that entails.
Gotta love us Aussies.
I suppose it would be okay if there was anything to be saved (Deep carbon fears of a shopping centre king, April 20). If there is a serious problem why isn't anyone doing something to develop thorium nuclear reactors to produce electricity and hydrogen generators to run cars n trucks, etc. But man-made emissions consist of about 0.00004 per cent of total atmospheric mass. Water vapour and the sun have more effect on climate than CO2. The carbon tax is a non-solution to a non-problem.
Why does carbon tax worry so much Gadnel? (Deep carbon fears of a shopping centre king, April 20.)
At the end, isn't it fair that some part of the tax burden to be borne by the landlords? Why should everything go onto the consumers? Isn't it the businesses which have to change their behaviour and to build better shopping centres? Aha, one can say they would change if the demand changes – e.g. the consumers' behaviour. This would be true on a very competitive market, which Australia totally lacks. The competition is so weak, there is no room for consumers to drive much changes via demand. The consumption is stuck to the big retailers in the shopping centres at least regarding food.
When people say the tax (which I agree with in principle) is an impost on industry – it's not (Deep carbon fears of a shopping centre king, April 20)
It's an impost on consumers and workers (one of my friend's clients will be shutting down the business after receiving a carbon bill in excess of wages).
For retail, this will:
- force really marginal owners to close
- those with more power could demand rent relief
- force prices up for those who are price makers (luxury brands, etc), which will force more people online
Crazy stuff.
It's not just shopping centres (Deep carbon fears of a shopping centre king, April 20). My parents have a pet shop and they have high electricity costs because they sell tropical fish, which means the water has to be heated. Reading some of the comments above, my parents will have to invest in a gas turbine. So it's not just people who have a carbon footprint, so do fish it seems!
The cost of solar power is rapidly decreasing (Deep carbon fears of a shopping centre king, April 20). I think '10 times' is old data. Yes, I have a solar system and it will have paid for itself within five years and I put it in when prices were high. I have not had to pay for electricity for over two years.
The reason we have shopping centres is because most people want to pay the least amount for stuff. Service, particularly in Australia costs a fortune (Deep carbon fears of a shopping centre king, April 21).
I hear people saying, "we should be supporting Australian products and services" but the sales figures are showing the truth; that most people will try and buy items the cheapest they can from wherever. A relative of ours who is a professional with a family income over $200,000 per year was happily mentioning that they saved $120 by buying a pair of brand name shoes over the internet and I also hear her calling for buying local and sustainability. Nobody seems to want to be honest about their own ugly dealings.
Everyone in Australia wants to earn high wages and yet no one seems to want to support those wages through purchasing Australian products. Dick Smith in resignation has sadly said this is true.
Who are the winners with the introduction of a carbon tax? (Deep carbon fears of a shopping centre king, April 20.) Buying and selling something that is "invisible" is going to prove quite difficult when it comes time for the annual stocktaking. Can someone at least identify the colour of these whatever transacted – vapours, odours, gases, etc?
Why not use roof space for PV solar? (Deep carbon fears of a shopping centre king, April 20.)
Gandel needs to ring his banks and renewable power experts and find out latest world prices turn your shopping centres into power stations.