Bilfinger GVA’s sixth Green to Gold survey reveals an urgent need for more action and greater leadership in tackling sustainability requirements in commercial real estate.
The unique biannual survey, the sixth since 2008, questions UK real estate fund and portfolio managers on how they view the risks of rising sustainability pressures and market demands.
Positively, 71% of respondents see benefit in engaging with occupiers, 55% plan to create asset level carbon or energy reduction plans, and 52% are looking to train staff on the risks and opportunities. In addition, 48% are seeking to outperform current building and planning regulatory requirements, 23% are striving to set service delivery standards for supply chain and 16% are seeking to set science-based emission reduction targets.
However Birmingham is faring better than most places, due in part to its sophisticated landlord market and a combination of pressure and expectation from both within prospective occupiers’ companies and across the industry generally.
Charles Toogood, Senior Director at Bilfinger GVA, said: “The Birmingham market is a reflection of the wider national picture, with a strong impetus on sustainability and environmentally efficient buildings. This is largely in response to occupier demand, but is also a result of internal CSR policies.
“While BREEAM remains an important measure of environmental performance in a building’s construction and operation, this only applies to new developments and Energy Performance Certificates (EPCs) remain the principal yardstick of environmental credentials.
“With a strong EPC rating higher on a prospective occupier’s list of requirements than ever before, we are seeing greater investment from landlords into measures that will improve the rating, with the knock-on effect of reducing service charges and operations costs for the tenant.
“Some landlords are of course taking steps to de-risk their properties ahead of the introduction of Minimum Energy Efficiency Standards (MEES) on 1 April 2018, which will ensure that they have greater lettings prospects. This is of particular relevance to refurbishment projects, such as Cornerblock on Cornwall Street, where Bruntwood is targeting an EPC A rating.”
Although 84% of survey respondents acknowledged that they have a sustainability strategy in place, there are still huge gaps that need to be filled in order to meet appropriate standards.
Only 50% admitted to assessing operational energy efficiency, whilst 63% are not assigning specific figures for the costs or benefits of sustainability issues in investment appraisal calculations. Added to this, 43% are yet to assess their portfolio’s risk profile with regards to Minimum Energy Efficiency Standards.
Jon Gibson, Associate in Research and Sustainability at Bilfinger GVA, said: “Our findings don’t show the signals of progress that we would expect considering the broader global trends. We now find ourselves with more to achieve in less time. The Paris Climate Agreement and the 2015 Sustainable Development Goals have focused the attention of political and business leaders. Business now needs to do more. A handful of large companies leading in the field of sustainability is not nearly enough. We need a collective industry response requiring true leadership to deliver transformational change.
“Our Green to Gold survey illustrates how short investment horizons appear to translate into less focus on sustainability. Existing corporate and fund level sustainability strategies are not translating into the level of change at acquisition and management level. F and G rated EPCs are known to be a risk, but the actual level is still largely unknown, while action on mitigating climate change is set to be far below the required level to meet national and global targets.”