A group of carefully selected building industry leaders recently gathered for the latest Breakfast on Black held at The Fire Station in
. After a hearty breakfast guests were treated to an informative and challenging presentation from Richard Francis, Director of Sustainability at Gardiner and Theobald. Waterloo
Director of Sustainability
Gardiner and Theobald
Richard’s presentation “Ethical + Fiscal = Inevitable” was delivered with his trademark combination of transatlantic easy style and powerful analysis of the challenges facing the construction industry. His presentation was split into four sections coving both the immediate drivers for change along with those that he has identified as looming just beyond the horizon. He neatly summarises the journey ahead as the progression from beauty pageant to talent show, illustrating the need for evidence based decision making along with more intelligent procurement.
Richard started by identifying the proliferation in regulations that are being developed to try to achieve more sustainable outcomes. He made the point that when looked at as a whole there are some key facts that can be identified; that the direction of regulation is to encourage disclosure which leads to transparency and that transparency is essential to allow a market to be created.
The market that is emerging is characterised by wider choice, with smarter occupiers demanding shorter leases and more flexibility. He posed the question as to why the property industry insists on using outdated names like “landlord” and “tenant” rather than “supplier” and “customer”; questioning if changing names would help to encourage improved quality and higher standards of aftercare.
He reviewed the current state of the market and identified that there has been a dramatic growth in the amount of available second hand property on the market which has increased from about 3 million square feet in 2000 to over 13 million square feet by 2011.
When investors, developers and occupiers are asked to identify the drivers that they believe will lead to property becoming obsolete in the next 5 years, they all identify energy efficiency as either the first or second most likely cause.
Richard characterised the market as in a state of rapid and multifaceted change, with buildings increasingly being judged on how they perform, with savvy occupiers scrutinising certifications like BREEAM and LEED assessments and demanding evidence that actual performance in use is as predicted before they are willing to sign-up. He sees a growing trend that is moving away from simply quantifying cost to growing importance placed on assessing value.
He illustrated this trend with the fact that 10 years ago it was hard to define, measure or value green buildings, but that over this period specialist knowledge relating to sustainability has become more generally accepted and that this has lead to a transformation of the market as a whole. He illustrated this point with a quote from Jones Lang Lasalle 2011 Perspectives on Sustainability report:
“Five years ago, a corporate real estate executive might have thought sustainability was a costly way to make the company look good to employees. Two years ago, that same executive probably focused on energy management as a way to save money in the short run. Today, he or she may be pursuing green strategies that enhance employee productivity”.
For most companies, property costs are normally amoungst their top three highest costs, along with those associated with employing their personnel. In striving for value it is essential that the effect that building design has on occupant behaviour is more deeply understood. Richard made the powerful point that people are the crucial, but until now overlooked, economic component of sustainability.
He reinforced this with the 90% rule; namely that 90% of most organisations environmental impacts come from property occupation, that 90% of most individuals working life is spent indoors and that 90% of whole life costs can be directly attributed to their personnel.
When senior executives are asked about the relationship between productivity and sustainability over 2/3 of respondents expect more sustainable buildings to facilitate their people being more productive, and that these productivity gains represent the largest potential economic benefit that sustainable buildings can deliver.
While Richard acknowledged that the notion of sustainable buildings commanding a premium is difficult to prove, there is he contends a growing body of evidence that this may be the case. He presented data drawn for the
UK, Europe and the which quantified this “green premium” at somewhere between 3 and 8%. He also explored the notion of a “brown discount” where poorly performing stock is financially penalised by the market; demonstrating that increased energy costs could account for as much as £3.00 per square foot. US
He posed the question if this approach were applied to occupant productivity what would that do to the value of the best and worst performing examples? As CBRE identified in their 2011 publication "Sustainability the Great Differentiator", a 10% increase in performance could easily equate to added values equilivalant in many cases to an organisations total rent. Richard went on to highlight that total staffing costs equate to 10 times total property costs (design, build, operate and maintain) for a building with a typical 30 year lifecycle.
Richard concluded his presentation with his take on what the future may look like. He challenged the way buildings are valued, based on historic performance and taking little or no account of performance in use or wider sustainability issues. He expressed his opinion that due diligence processes are being adopted by many larger occupiers to properly assess buildings and that this approach provide a good indication of the likely direction of travel of the industry as a whole.
He explored the subliminal messages that property performance conveys about brands and how this association is likely to drive increasing demands for higher performing buildings that reflect wider brand values. He asked why should customers trust companies who cannot manage their assets and people well and by implication why should they be trusted with our resources?
In thinking about what a brands building says about the way they value their people Richard made the connection between a commitment to sustainability and the ability to build loyalty, engagement, efficiency and pride among its workforce. As Richard put it:
“if you think it is just about the building, you are missing a giant opportunity”
He finished off his inspirational presentation with a checklist of key actions that should be adopted to ensure more sustainable outcomes:
• Recognise the importance of performance
• Understand the limitations of existing standards
You would have thought that risk averse property investment funds would attach enhanced value to lower risk, more sustainable buildings, however to date this has not been the case. Similarly, occupiers must demand buildings that can demonstrate that they have been conceived specifically to enhance occupant performance. Finally, developers must select design teams who can demonstrate that they approach their work from a “user centred” philosophical perspective.