Landsec and Hammerson are innovating to increase energy efficiency and renewables use in a sector resistant to change
When former New York mayor Michael Bloomberg opened the new London HQ of his global media company last month, the £1bn building was hailed as “the world’s most sustainable office”.
The building, designed by “starchitect” Norman Foster, is ranked outstanding by the BREEAM environmental rating system. Its innovations include bronze blades that can open to allow natural ventilation and smart CO2 sensors to pinpoint areas that need to be heated and cooled at any given time. It also has a combined heat and power (CHP) plant that uses the heat created in generating power to warm the building.
Buildings are one of the world’s biggest sources of CO2 emissions. In the US they account for 40% of energy use, more than any other sector, according to the US Green Building Council. Yet according to the US Environmental Protection Agency, 30% of the average energy used in commercial buildings is wasted.
Cutting CO2 emissions in commercial buildings is harder than for other sectors because each individual property emits relatively little. There is also a mismatch between the interests of tenants and owners, with the latter having no incentive to invest in energy-saving and renewables technologies whose benefits in lower energy bills accrue to tenants.
A Carbon War Room report found that real estate investment trusts with a higher sustainability ranking perform better financially
Nonetheless, expectations have changed in the real asset sector, says GRESB, the Global Real Estate Sustainability Benchmark. “Investors are asking for greater transparency about the environmental, social and governance (ESG) performance of real asset portfolios. Regulators are mandating ever more ESG disclosures and improvements. And tenants, owners and other stakeholders are demanding more sustainable, greener and healthier buildings.”
Julie Hirigoyen, CEO of the UK Green Building Council, said there has been an improvement in energy performance in UK buildings: “Between 2010 and 2016, we have seen a clear increase in A- and B-rated buildings and a clear decrease in Fs and Gs.”
But she adds that “the performance in operation of the vast majority of our buildings is simply not commensurate with the challenge of meeting our carbon targets.”
Since 2009, the energy intensity of commercial buildings as a whole has fallen only marginally, by about 2%, says Hirigoyen. “But those buildings owned by progressive investors have managed to improve their energy intensity much more dramatically – by 25% or more.”
Some of the biggest developers say they now have sustainability embedded at the heart of their operations. “Sustainability is a key issue for us,” says Caroline Hill, head of sustainability at Landsec, (formerly Land Securities), the UK’s largest listed property developer. “It’s about being in business in 10 or 20 years’ time. It’s fundamental to our future existence.”
Knowledge-sharing with our contractors and competitors is really important. It only makes a significant difference if everyone is doing it
Louise Ellison, her counterpart at rival Hammerson, agrees. “We are long-term holders of assets, so we have to make sure that what we hold and operate is fit for purpose today and in the future.”
The Paris Agreement on Climate Change showed the need for big business to step up to deal with the issue, she adds. “Our customers are very demanding now, too. Staff in professional services or finance want to work for a company that has a strong sense of purpose. Part of that is taking space in a building that has a low carbon footprint and is environmentally responsible.”
Meanwhile, investors are asking more questions about the performance of property investments in the wake of the recommendations of the Financial Stability Board’s Taskforce on Climate-related Financial Disclosures, which call for investors to ask about governance, strategy, risk management and targets relevant to climate risks.
A Carbon War Room report found that real estate investment trusts (REITs) that had a higher sustainability ranking in the annual GRESB REIT survey performed better financially. The report also found that sustainability measures reduced exposure to risk and volatility.
“Sustainability efforts work best where companies really hard-wire sustainability into everything they do,” says Hill. Landsec is the first property company in the world to have a Science-Based Target, which commits it to cut its greenhouse gas emissions per m2 by 80% from 2014 levels by 2050.
It is also a signatory to the RE100 commitment to procure 100% renewable energy. In August it fitted 2,902 solar panels atop its White Rose shopping centre in Leeds, the biggest PV system at a retail site in the UK, and the ninth of its assets to have a PV installation. The installation has a relatively long payback period of eight years, but Hill says Landsec’s tenants will benefit from reduced energy bills, and the highly visible PV panels will provide a reputational fillip both for Landsec and its tenants.
The company now considers sustainable design and innovation, appropriate use of natural resources and carbon management across its development, property management and acquisitions units. “That doesn’t mean we wouldn’t buy a particular property if its sustainability performance was poor, but we would have to have a plan to bring it up to our standards,” she says.
We need people who really understand how the building works to engage with the people who occupy it to drive out inefficiency
Hammerson’s Net Positive initiative commits the company to be net positive for carbon, resource use, water and socio-economic impacts by 2030, meaning that its operations will bring more benefit than negative impact in those areas.
Both firms agree that one of the keys to success is collaboration, both with industry peers and with tenants. “When we looked at our emissions, we found that Scope 3 [indirect emissions due to a company’s activities] was about 90%, about half in construction and half in how the building is used,” says Hill.
“Tenants’ emissions in our shopping centres massively increase our footprint, so we have to do more with them,” agrees Ellison. “We talk to them when they come into our properties about their ambitions as a retailer and how those ambitions can include being as sustainable as possible.”
At the company’s retail park in Rugby, tenants have to sign up to sustainability measures. “The reaction has been incredibly positive. After all, if you reduce your energy consumption, you reduce your costs,” Ellison adds.
Hammerson is also asking its suppliers to help it meet its goals. “We give them the opportunity to come forward with good ideas. As long as we are clear about what we want them to do, we get a positive reaction.”
Industry collaboration comes through forums such as the UKGBC’s Better Building Partnership, which has developed a range of tools and guidance, including a Better Metering Toolkit to help property owners gather accurate data on energy and water use; a Sustainability Benchmarking Toolkit, and the Real Estate Environmental Benchmark (REEB), which helps users to compare the performance of different buildings.
One of the exciting trends is that developers are starting to design for performance rather than compliance
“Knowledge-sharing with our contractors and our competitors is really important. It only makes a significant difference if everyone is doing it,” Ellison says. “It’s also important to work with other sectors because it shows how this need to decarbonise feeds into the rest of the economy – how are other companies selling it to investors, how are they understanding the risks. In addition, we get better buy-in internally if people see that this is an economy-wide challenge.”
A lack of accurate and timely data on the energy performance of the buildings they occupy is one of the biggest challenges, according to the Better Building Partnership. Another is a performance gap between how a building is designed to be used and how it performs in reality.
Current UK regulation focuses on how design and technology improve the predicted performance of buildings, rather than actual in-use performance, as Australia’s NABERS (National Australian Built Environment Rating System) scheme does. The Real Estate Environmental Benchmark is the Better Building Partnership’s attempt to address the performance gap.
“One of the more exciting recent developments is that developers are starting to design for performance rather than designing for compliance,” says Hirigoyen. “If that spreads across the market it could really make a difference.”
There are all sorts of technological solutions beyond solar panels available to cut emissions in buildings, says Hirigoyen. These include combined heat and power generators and “chilled beam” ventilation systems. Buildings can also use everything from lake water to geothermal energy for heating and cooling.
As we move into the age of the electric car, companies are increasingly installing charge points in car parks. With the addition of solar panels, battery storage and vehicle-to-grid technology, these could become an asset that can help operators to cut peak load or sell power into the grid at times of high demand.
There are also opportunities to collect the waste generated on site, particularly food waste, and turn that into energy either through anaerobic digestion or by making fuel out of waste oil.
“But there are even more opportunities in fairly mundane measures such as green leases, environmental management systems, monitoring, targeting and improving the way buildings operate," Hirigoyen says. "If all the systems you install are too complicated, occupiers may not understand how to use them. We need people who really understand how the building works to engage with the people who occupy it to drive out inefficiency.”
Ellison agrees. “People assume that all the low-hanging fruit has been picked, but if you have a big portfolio with a number of older buildings, it takes a while to get around to them all. The main opportunities come with lease renewals or when new tenants move in.”
Main image credit: Foster + Partners
This is one of a series of articles on climate. See also: