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Articles 14th May 2024 Energy Efficiency

Once a developer has completed a new scheme and concluded lease negotiations, it is usually time to step back and allow the occupants to conduct the day-to-day running of the place with minimal interference. However, in a world where buildings are increasingly scrutinised for their sustainability and energy efficiency, this hands-off approach may soon be a thing of the past, writes Tim Clark, Legal & Professional Editor for Property Week

“Historically, as an industry, we have not been good at looking back at what we have been doing,” says Mike Gosling, partner and global workplace sector lead at consultancy firm Cundall. “We design, build and move on to the next [project].

EPC credit

Image: shutterstock / NicoElNino

“However, there are many additional elements that cannot be left out of the picture, one of which is how we use the buildings we have designed.”

Gosling says there are four reasons developers should care about the energy efficiency of their buildings: “First, it is likely to become law soon; second, investors will only invest in sustainable projects; third, your competitors are starting to do it; and fourth, it is what future tenants and occupiers want.”

“You don’t only want an efficient system – you also need to manage it properly.”

Vincent Bryant, Deepki

In an environment where developers compete to burnish their environmental credentials, many are seeking certification from systems such as NABERS to highlight the quality of their energy efficiency.

Several buildings in the UK have been rated using the NABERS Design for Performance framework. As these buildings reach the end of their first year of operation, they should provide data on how they have performed and, in particular, whether they have met the criteria of the NABERS scheme in terms of operational energy use.

It could be said, however, that a building is only ever as good as those who occupy it. More developers are becoming aware that while they may well have built an efficient building, they can wave their hard-earned accreditations goodbye if it is not used correctly.

Greater engagement on energy efficiency

According to Gosling, there is a need for greater engagement between tenants and landlords to put agreements in place before leases are signed. His views are echoed by Vincent Bryant, chief executive of environmental, social and governance (ESG) at market intelligence firm Deepki.

“You can have the most efficient car in the world, but if you spend your time driving like crazy, speeding up and slowing down, then it will consume all the fuel and it’s not very efficient,” says Bryant. “So, you don’t only want an efficient system – you also need to manage it properly.”

Environmental provisions within leases have become more common in the past half-decade and landlords are now starting to ask tenants to operate their space with ESG credentials in mind. As Property Week reported last year, lease drafting can play a vital role in raising ESG standards . Prescriptive lease provisions can cover a tenant’s day-to-day activities and include recycling, energy use and overall carbon emissions.

“We are seeing owners ask their tenants to respect some environmental conditions for their building, such as temperatures and lighting systems after closing hours,” says Bryant. “These best practices seem to be more present in the leasing contract, or at least in the discussions between landlord and tenants, and that is a very good thing.

“Operationally, insufficient metering is hampering [data] collection.”

Vicky Cotton, Workman

“It’s very important to align people’s interests and to do that you need rules of engagement, data and key performance indicators to measure expenditures.”

Landlords can also tailor leasing contracts to encourage lower energy use, potentially linking rent levels to how much electricity is consumed.

While such actions may seem drastic, or even over-reaching, similar options are being actively considered by major developers. For example, shopping centre operator Unibail-Rodamco-Westfield (URW) unveiled a bold strategy last autumn to create an ESG ranking of its retail occupiers for the first time.

The aim is to turn the retail giant into one of the most sustainable real estate operations in Europe. URW chief executive Jean-Marie Tritant outlined the group’s plan to reduce its scope 1, 2 and 3 emissions by 90% in absolute terms from a 2015 baseline by 2050 and by 41% by 2030. Tenant emissions fall under URW’s scope 3 emissions and will also be monitored.

“After the lease has been signed, the engagement needs to continue,” says Gosling. “Having a feedback loop and regular discussions between landlords and tenants to see how the building is being used by the tenant and how the energy use is responding is an important element.”

Gosling adds that facilities managers can play a crucial role in ensuring that developers are not overwhelmed by the process. By having a “deep understanding of the optimal way” to operate a building, he says, they can ensure it performs to the standards to which it was designed.

Another key issue is the sharing of data that can feed back accurate information about an occupant’s energy use, as well as ensuring that data-sharing forms part of any contract signed by either party.

“Although we are seeing a greater recognition of the need to integrate intelligent proptech solutions into asset strategies to ensure greater ESG progress, we recognise that the process of implementation is often alien to some in our industry,” says James Hallworth, partner at property management and building consultancy, Workman.

“In particular, some are nervous to entrust the ownership and operation of mechanical systems to tenants, and to trust the data that has been produced by these systems when filling out accreditation reporting.

“However, these concerns can often be mitigated through continual dialogue between asset managers, property managers and their individual occupiers.”

Interlinked issue

Building management is an interlinked issue. According to Bryant, ensuring a building is being used efficiently pulls together threads that combine social, economic and regulatory agendas.

Employers looking to persuade their staff to return to the office need to show that if they do, they are not wasting energy, and that their workplace is ESG-friendly and “not only an amazing location”.

On top of this, volatility in the energy markets has shocked most finance directors into making energy efficiency a more important goal, while regulations are becoming ever-more stringent as countries look to increase their carbon-cutting measures.

“Some years ago, when real estate became a financial industry, we implemented ERP [enterprise resource planning],” says Bryant. “We updated processes and had auditors looking at the figures once a year. We started issuing annual then quarterly and monthly reporting, and we stopped talking about buildings and started talking about assets.”

Accurate reporting

Another aspect that owners need to consider is the accuracy and reliability of the information that is collated. Launched in May 2021, Workman’s Intelligent Building Operating System (IBOS) automates and optimises a building’s operations to allow performance to be detected and more accurately reported.

The system, which was developed by Workman in collaboration with technology partner Bubll Automation, uses cutting-edge ‘Internet of Things’ technology to allow automated operations, remote engineering capabilities and effective data analytics of building systems.

According to Workman, IBOS has collectively saved the equivalent energy of one trillion mobile phone charges and is installed in 60 buildings across London and the UK.

The system has been used at Republic London’s 270,000 sq ft Import Building, which is managed by Workman on behalf of developer Trilogy Real Estate. Over the past year, it has saved 20% of energy costs or the equivalent of 254,000kg of carbon dioxide. In financial terms, the saving is around £430,000 a year.

Office credit

Image: shutterstock / alice photo

“To achieve our Energy Performance Certificate and net zero pathway goals, Trilogy recognises that significant opportunities lay in the optimisation of building controls to ensure equipment is operating efficiently and at appropriate times,” explains May Molteno, Trilogy Real Estate’s head of social impact. “By implementing IBOS, Trilogy continues to maximise efficiencies, aligning to net zero interventions within our sustainability strategy.”

Despite the impressive results, there are still regulatory and legal barriers to overcome. Vicky Cotton, ESG director at Workman, says there are legal barriers to implementing higher ESG standards by collecting more data on utility and energy use across portfolios.

She adds that at the tenant level, the UK has not implemented any statutory requirements for occupiers to record and submit data on energy, water and waste, unlike peer markets such as France.

“Significant opportunities lay in the optimisation of building controls.”

May Molteno, Trilogy Real Estate

“Instead, asset managers often rely on data collected from the common areas of a building to which they have direct access and control, which provides an inaccurate and incomplete understanding of a building’s usage for accreditations such as GRESB,” says Cotton.

She adds that even though many occupiers are increasingly driven by their own ESG initiatives and are, therefore, willing to share this data proactively, this will fall short until comparative legislation is enacted.

“Operationally, insufficient metering is hampering [data] collection and reducing the number of data points property managers can use to evaluate a building’s operation. For most assets, this will only be solved by the retrofitting of smart proptech solutions.”

Workman ESG                   Workman Building Technology

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