Sustainability as a business benefit in the commercial property sector
Our recent participation in an illuminating Mayfair Capital seminar reinforced ideas on how sustainability is a business benefit in the commercial property sector.
The London seminar focused on UK Real Estate as an alternative and attractive asset for charity and pension trustees, with expert contributions from Lloyds Bank, Mercer, Alliance Trust Investors, The Crown Estate and GVA.
SaveMoneyCutCarbon contributed to the Social Responsible Investment debate on the day with a direct exposition of the business case for energy efficiency – five ‘no brainers’ for the commercial sector property.
Our MD, Mark Sait, and I were impressed by the level of questioning during the event and in the informal gatherings afterwards. What struck us was the clear grasp of the environmental need for sustainable investment and property management together with the growing understanding that this would have a highly positive effect on the financial side.
Utility costs will only continue to rise – they have doubled in the past decade and are forecast to double again over next ten years.
Add to this inexorable rise the stark fact that the commercial property sector is wrestling with data a £29 billion green refurbishment bill and there are the makings of challenging, if exhilarating times ahead.
The Energy Act 2011 shifts the terrain for commercial property owners and Estates Gazette advises that around 200,000 commercial properties will need expensive refurbishment to avoid being un-rentable when the deadline for minimum energy standards is reached on April 1st2018.
There is a £29 billion energy-efficiency bill looming for these properties and the clock is ticking. In four short years, it will be illegal to let a commercial property that has an Energy Performance Certificate (EPC) rating under an ‘E’.
This indicates that 16% of non-domestic building stock in England and Wales falls below the EPC benchmark. The Scottish government has announced a requirement for landlords to carry out improvements recommended by an EPC if and when they sell or re-lease a property.
The impact for the sector is not only going to be felt in four years’ time. Even now, the energy efficiency regulations are starting to be used as a bargaining chip in commercial property negotiations.
Whatever the final guidelines from government, which we await with some impatience, the pressure on energy efficiency in the commercial sector is a financial plus point as there is a growing movement for a premium to be attached to greener offices, warehouses, retails outlets and so on. The market is moving rapidly towards having sustainability as a key element in the demand list.
Companies want to be seen to be green, not least because this reduces the potential for negative press and public opinion moving away from a brand. There is also the undeniable and growing burden of rising energy bills and the requirement for the most efficient ways to controls lighting, heating and water costs.
Commercial properties that enable reduction in electricity costs through LED lamps, deploy intelligent, efficient controls on heating and ventilation, manage water consumption effectively and go beyond basic compliance will be better set to face any economic and environmental challenges.
Five ‘no brainers’ for sustainability
The SaveMoneyCutCarbon five ‘no brainers’ for environmental and commercial sustainability are:
- Saving Water
- LED Lighting
- Lighting controls
- Heating controls – HVAC /boiler efficiency/intelligent pumps
- Effective measurement and monitoring
We assess that the business case for energy efficiency in the commercial property sector is now beyond all reasonable doubt and one of our key goals in our work is to go far beyond the “nice-to-have” environmental tactics that do just enough for regulatory compliance in this and other sectors.
The opportunity for the commercial sector is to:
- generate higher yields while ensuring Energy Act compliance
- reduce total cost of ownership
- reduce maintenance costs by a factor of five with knock-on improvements in maintenance work and health & safety
- ensure more market-attractiveness
Let’s unpack those five key elements needed for an effective, sustainable and rapid-payback strategy to cut consumption of increasingly expensive utilities.
Use less water
Very clear impetus here if properties are metered. But you also have to remember that costs of heating and pumping this precious, and increasingly expensive, resource are significantly reduced through better use management. We advise simple, highly effective steps: install eco showers and shower heads, fit eco taps or use quality tap aerators.
Retrofit LED lighting
Why LED and not other energy efficient products? To The simple answer is that LED is the best technology, most environmentally friendly and most efficient by some way. Fitting an LED should give you up to 50,000 hours of life, using only 10% of the energy that a traditional light would consume. It’s also almost “fit-and-forget”, which also reduces maintenance costs.
Deploy intelligent lighting controls
Lighting can account for up to 40% of annual electricity usage in commercial buildings. Intelligent controls save energy without sacrificing style or convenience. For single buildings, or large commercial campuses, dimmers, occupancy/ vacancy sensors, light control systems, and shading solutions reduce lighting energy use, optimise system performance, and enhance the visual environment.
Manage effectively all heating and air conditioning
Every property can benefit from fully surveyed and properly installed solutions that reduce energy use dramatically – from smart room sensors to intelligent heat pumps.
That might appear to be stating the blindingly obvious but in our experience the deployment of agile, effective and responsive monitoring systems is often neglected. Without this data, the potential for maximum efficiency and rapid response to changing conditions is limited.
Our work with leading hospitality groups indicates the potential for exceptional commercial benefits in the commercial property sector. [link to case studies]
In properties where the owner has operational involvement, the agile deployment of the “five no-brainers” should deliver radically reduced utility consumption that does not rely on changing user behaviour, with assured increase in gross profit and yield.
Even if commercial sector property owners have no involvement, the opportunity is available to demonstrate good landlord status through structured easy access to cost-cutting, products and solutions.
If a property is empty and ready to let then utility-efficiency measures reduce total cost of ownership while improving letting prospects and yield. If the property is being refurbished, then owners will benefit from expert efficiency management, best practice and better use of refit funds.
Responsible, far-sighted companies in the commercial rental sector can grasp a unique opportunity to launch sustainable, financially effective green strategies that cut costs and carbon footprint – great for the balance sheet and the planet.