What Price Sustainability? The challenges for the CRE function and our ability to meet them.

Transcription

1 What Price Sustainability? The challenges for the CRE function and our ability to meet them. June 2011 What Price Sustainability? The CRE Sustainability Drivers: The Corporate Driver The Energy Driver The Carbon Driver The Resources Drives The People Driver The Outcome Sustainability Goals The Real Impact Of Sustainability The Occupiers View The Investors View Strategies To Manage The Sustainability Agenda 2

2 CRE Sustainability Drivers -The Corporate Driver 3 CRE Sustainability Drivers The Energy Driver The UK s commercial office portfolio consumes 24 TWhr of electricity, oil and gas (around 1.5% of UK total) Utilities account for around 35% of a commercial office buildings operating expenses (excluding rent, depreciation and RET ) but under 9% of RE expenses. Utility prices continue to be highly volatile /MWh (Electricity) & p/therm (Gas) UK Year Ahead Base Load Electricity & Gas Prices (6m rolling) Electricity Gas % of the energy used in our buildings is in the form of embedded energy in the materials and construction process

3 CRE Sustainability Drivers The Carbon Drivers In the UK Offices contribute 6.8 million tonnes of CO 2 per annum Climate Change act committed the UK to an 80% reduction in carbon emissions by 2050 and introduced Carbon Budgeting to manage process for carbon emissions. To be managed through: 5 Cap and Trade mechanisms EU Emission trading scheme Carbon Reduction Commitment (CRC) Carbon Taxation Climate Change levy Building Policy Asset Certificates Energy Performance Certificates Operating certificates Display Energy Certificates Building Regulations, Part L CRE Sustainability Drivers Resource Drivers Water An estimated 1/3 of world's population currently lives in water-stressed countries. This is set to increase to two-thirds within 25 year including significant parts of Europe. Majority of water usage in buildings is embedded in the products we use in its construction 1kg of concrete uses 2 litres of embedded water, 1kg of timber 20 litres of water with 40 litres of water embedded in1kg of steel Or in the materials we use during its life 1 kwhr of oil has 4.6 litres of water and 500 sheets 5000 litres of embedded water. 6

4 CRE Sustainability Drivers Resource Drivers Landfill 700 million cubic metres of remaining landfill capacity in England and Wales on December 31st 2006 (source: Environment Agency) At then current rates of disposal sufficient for a further 7 years. The Government aims to reduce the UK s dependence on landfill through investment in alternative waste management options such as anaerobic digestion technology. Linked to increasing levels of landfill tax: 56/tonne in 2011, 64 in 2012, 72 in 2013, and 80 in CRE Sustainability Drivers - The People Drivers Question: To what extent are each of the following workplace factors most important to you. Communication Leadership Collaboration Social Interaction Sustainability A cool place to be Most Important Communication the single most important driver for Millennials of those ranking it first or second However...if we include top 3 answers then the order changes: sustainability becomes even more important Collaboration Social Interaction Sustainability Leadership Communication A cool place to be Most Important

5 CRE Sustainability Drivers - The People Drivers Question: Which of the following factors would be willing to sacrifice in place of a more sustainable workplace... Willing to sacrifice Loss of owned desk Less space in workplace Less technology Reduction in Quality of workplace Reduction in Salary Millennials willing to have less workspace for a more sustainable workplace The Outcome The CRE Sustainability Goals jdsjsj Absolute GHG reduction 25% by 2015 from 2005 base year Supply chain sustainability Facilities waste to landfill 40% reduction from 2005 base year Water use reduction 20% reduction from 2005 base year LEED 15% of portfolio LEED certified by 2015 Net energy use reduction 20% reduction by 2015 from 2005 base Alternate and renewable energy 15% of electricity by

6 The Real Impact of Sustainability?- The Occupiers View 70% of senior executives across Europe regard sustainability as an important consideration, with over 40% regarding it as very important or fundamental increase of over 9% from Not Important Limited Importance Important Very Important Fundamental The Real Impact of Sustainability?- The Occupiers View Only 21% of organisations currently occupy green space, although almost 50% said that they would like to. 28% not interested Currently own/occupy a green building Do not occupy a green building but would like to Do not occupy a green building and not interested in doing so Don t know

7 The Real Impact of Sustainability?- The Occupiers View Over 90% of respondents suggested that sustainability does play a role in property decisions, albeit limited for 40% 13 Not Role Limited Role Significant Role Fundamental The Real Impact of Sustainability?- The Investors View Sustainability manifestation of the value differential Split over whether it is a green premium, a brown discount or a mixture of both A lot of larger corporate tenants will want to go to green. That may or may not have a rental differential but it certainly will have consequences like reducing letting voids on the buildings that comply compared with others that don t comply. 14 I think that the buildings that aren't energy efficient will lose value. It is most likely that there will be a brown discount.

8 The Real Impact of Sustainability?- The Investors View Sustainability - scale of impact on values Generally unable to predict the scale of the future impact on value It is not possible to say. It's too difficult to measure because there are a hundred thousand different variables in there We cannot look back over ten or 15 years in the way we can with other criteria. 15 In three to five years I think the portfolio effect will be a five per cent advantage in terms of total return. So you are looking at a premium of one per cent per annum on a five year term. Ten per cent is a complete guess. The Real Impact of Sustainability?- The Investors View Investor perceptions of sustainability Investors see the value primarily in better asset performance through fewer voids and ability to attract better occupiers Little expectation of higher rents or additional income 16 strongly agree strongly disagree

9 The Real Impact of Sustainability?- The Investors View Sustainability factors most likely to impact value Energy efficiency considered the key issue that will impact value Exposure to flooding, carbon emissions, green credentials (ratings) not considered key 17 Importance 1st 2nd 3rd The CRE Sustainability Agenda The CRE Sustainability agenda is still alive because of: The Corporate Agenda Need for cost saves Emergence of carbon control legislation The importance of CRE Sustainability agenda will grow as: Cost pressures continue Resource pressures increase The market sees real value rather than just differentiation. 18 The people agenda comes to the fore

10 Strategies To Manage The CRE Sustainability Agenda Embed sustainability into all of the CRE and FM activities. Consider sustainability in all design decisions and understand its interaction with reliability, performance and cost. Incorporate sustainability into the procurement process. Ensure engagement of all stakeholders. Utilise external accreditation programs to support and recognise the integrated sustainable design and construction approach: LEED BREAM 19 Strategies To Manage The CRE Sustainability Agenda Monitor sustainable performance Benchmark using internal and external programs Energy Star Portfolio Manager Use external accreditation on operational performance: LEED EB BREAM In Use Green the Supply chain Engage with building users 20