EVALUATION OF SUSTAINABLE ASPECTS IN REAL ESTATE MANAGEMENT

11-022 The 2005 World Sustainable Building Conference, EVALUATION OF SUSTAINABLE ASPECTS IN REAL ESTATE MANAGEMENT Urban PERSSON Lic. Eng 1 Anne LANDIN Ph.D 2 Stefan OLANDER Lic Eng 3 1 Pedersen & Persson Project and Environmental Management, Raketgatan 14, 224 57 Lund, Sweden, pedersen.persson@telia.com 2 Division of Construction Management, Department of Building and Architecture, Lund University, Box 118, 221 00 Lund, Sweden, anne.landin@bekon.lth.se 3 Division of Construction Management, Department of Building and Architecture, Lund University, Box 118, 221 00 Lund, Sweden, stefan.olander@bekon.lth.se Keywords: sustainable construction, stakeholder management, real estate management, evaluation model, significant aspects, continual improvement Summary In the EU and in Sweden there is an ongoing work with improvement in the area of sustainability. However, the problem for the management of a real estate company is to the most important sustainable aspects together with the usual economic considerations for an effective long-term maintenance of the building stock. This process will demand tools and methods to estimate the various aspects of sustainable construction and development when changes are made in the existing building stock. The aim of this study is to find methods that can be used in the construction and real estate management process for identifying and follow up goals of sustainability. The empirical part of the study will be carried out as a case study, with focus on the overall considerations of managing the changes in the existing building stock. The analysis of the case study will be conducted with the stakeholder urban evaluation model (STURE), and from the perspective of the real estate management. The study shows that STURE model could be successful in the long-term sustainable management of the existing building stock. 1. Introduction Real estate and property development projects will affect a large number of different interests, in both positive and negative ways. Representatives if these interests can refer to as the project stakeholders. These stakeholders will define their needs in the view of the sustainable aspects of ecology, economy, social development, and culture. However, they will value the different aspects differently according to their position to the project. These different values need to be addressed by the real estate company when they develop and change their existing building stock. As the work to a sustainable future continues, the overall strategy of managing the large existing building stock is to consider the stock as an important global basic resource in a long time perspective. This strategy should deal with the aspects of the large financial, physical and cultural capital together with qualitative aspects of all involved stakeholders. The stakeholder aspect should consider both the views of individual stakeholders as well as their ability to deal with the multiple and cross-disciplinary factors of sustainability. Authorities in Sweden have the ambition to improve the Swedish real estate and construction sector in regards to sustainable aspects. Monitoring environmental quality goals and adapting central government planning to regional and local needs will require special measures in certain areas. There is a requirement from the government to intensify the work of developing methods for reaching a sustainable development of urban and built-up areas. In the near future the construction process will face new demands and there is a lack of tools to evaluate the success of how these demands are met. The Swedish national environmental quality goals concerning the built environment will be used as a limit and a base for the study 2. Current situation of sustainable construction in Sweden The Swedish government has recently declared a strategy for sustainable construction. Community planning for ecologically sustainable development is one of the national environmental quality goals for the spatial planning and the construction sector. - 3198 -

The involvements of all stakeholders, particularly national governments, are playing an important role in the striving for a real improvement in raising the level of sustainability. The construction industry is Europe s largest industrial employer and this implies that social aspects are of particular importance in the sector. The relationship between construction activities, and the built environment on the one hand, and sustainable development on the other, is both significant and complex (European Commission, 2001). The operation of buildings accounts for 25-40% of final energy consumption in the OECD area. This is comparable with transport. And this does not even count the energy consumed for manufacturing building materials, etc. Construction of buildings and infrastructure could be responsible for up to half of all material used in some OECD countries. And then there is the waste that has to be managed and minimized (OECD, 2002). Several governments have tried to find different ways to gain sustainable construction. In Sweden several projects has been initiated for the concern of sustainable building during the recent years. One example is the dialogue project Building, Living and Property Management for the Future. This is a unique cooperation between companies, municipalities and the Government with the purpose to achieve a development of a sustainable building and property sector in Sweden. By the means of this dialogue, the parties have reached a voluntary agreement to take concrete measures for a sustainable development. The dialogue project Building/Living has three prioritised areas: Healthy indoor environment Efficient use of energy Efficient resource management In the Building/Living Project, the Government, together with companies and municipalities, has expressed a number of aims that they wish to achieve. The actors have signed an agreement on concrete efforts that are now being implemented. The participants in the project have defined a number of long-term goals, all of them originating in a vision that a sustainable building and property sector can become a reality within the time-frame of one generation. In the agreement the actors undertake to aim at achieving the goals of the dialogue project Building/Living and to carry out a number of commitments regarding concrete actions. The actors also undertake to contribute in the follow-up and evaluation of the dialogue project Building/Living. The Swedish building and real estate sector have formed an association, the Swedish Ecocycle Council for the Building Sector, of app. 40 organisations including developers, building clients, consultant engineers, architects, contractors and building material industry. The aim is that the building sector, through voluntary efforts, on market grounds and in close co-operation with authorities and legislation, succeeds in conducting credible, effective, co-ordinated and systematic environmental work that results in permanent environmental improvements (Ecocycle Council for the Building Sector). Recently they approved the Environmental Programme 2003-2010 and by this a voluntarily effort to reduce the sector s environmental impact in Sweden. This programme is based on an environmental review where the Swedish building and real estate sector s significant environmental aspects were analysed. The significant environmental aspects according to this programme are: The use of energy in the operation of buildings Resource productivity of materials in buildings The use of harmful substances in construction and operation Aspects of indoor air quality. 3. Stakeholder management in construction The stakeholder management process consists of executing the management functions of planning, organising, motivating, directing and controlling the resources used to cope with strategies from stakeholders (Cleland 1999). This means to analyse the impact different stakeholders can have on the success or failure of the project. A sufficient stakeholder management process should ensure a more effective project management process, because of the increased knowledge of the potential impacts, positive and negative, different stakeholders have on the projects outcome (Olander 2003). The experience from many construction projects is that the impact of stakeholders is increasing, especially the external stakeholders, not directly involved in the project, such as for example the affected neighbors, the general public and different local and national authorities (Boholm et al 2000, Olander 2002, 2003) From the sustainable point of view, the aim should be to conduct the project in such a way that as many stakeholder needs as possible can be fulfilled. Thus must a number of different criteria be evaluated in order to achieve this goal? The concept of multi criteria analysis (Dodgson et al 2001, Pomerol, Barba-Romero 2000, Beinat 2001) could be a way to achieve this, and thus combine the stakeholder aspect with the sustainable aspects of ecology, economy, social development and culture. However, the problem is to define and identify the relevant criteria of evaluation for each different alternative of the project. The stakeholder management process in combination with the sustainable evaluation models, for instance the Urban model (Persson 2001, 2002) could be a successful way to achieve this.

The Stakeholder-Urban Evaluation (STURE) model (Persson and Olander 2004) is a way to systemise the issues of sustainable construction throughout the process of real estate management. The model optimises sustainability objectives and targets of the real estate management organisation and of the specific conditions of an actual application. 4. STURE the Stakeholder - Urban Evaluation model The principle of STURE can be described by four steps (se figure 1); stakeholder analysis, specific conditions for the actual application, the general conditions of the organisation, the sustainability programme and the application of the programme Stakeholder Analysis Internal Stakeholder Demands External Stakeholder Influence Specific Conditions -Sustainability Review -Sicnificant Sustainable Aspects -Documentation General Conditions -Environmental Policy -Social Impacts -Economic conditions Sustainability Programme -Sustainable Objectives -Priority of Sustainable Objectives -Sustainable Targets Applications Plan of Sustainability and quality checks Choice of Alternatives Evaluation Tools Inventory of Facility Figure 1 Principle of STURE 4.1 STURE: Stakeholder analysis A stakeholder analysis is to identify the stakeholders and their claims on the project are essential to form and choose strategies in a stakeholder management process. When identifying stakeholders it is not enough to focus on formal structures of project organisation. It is also necessary to have a look at informal and indirect relationships between stakeholder groups and to assess their importance (Johnson, Scholes 1999). To effectively manage stakeholder interests it is not enough to just identify their demands and needs. Project management must also identify the relative power different stakeholders has on the implementation of the project. A method to do this is stakeholder mapping (Johnson, Scholes 1999), this approach is adapted from the concept of environmental scanning (Mendelow 1981). A tool in stakeholder mapping is the power / interest matrix (figure2) that analysis the following questions: How interested is each stakeholder group to impress its expectations on the projects decisions? Do they mean to do so? Do they have the power to do so? The power/interest matrix can be a useful tool to conduct the stakeholder analysis. Some powerful stakeholder can use or provide economic instruments to promote sustainable construction. From this analysis the external demands on the project, general conditions, as well as the internal demands, specific conditions, can be specified.

high Keep Satisfied Key Players Power low low Minimal Effort Level of interest Keep Informed high Figure 2 Stakeholder mapping, the power / interest matrix (Johnson, Scholes 1999) 4.2 STURE: General conditions The general conditions of the organisation include the application-related conditions directly linked to the organisation and its way of working. One main condition is the organisations environmental policy and environmental management system, including relevant parts of environmental objectives and targets. Another main condition is the social and cultural impacts of the external stakeholders influence. A third main condition is the economic conditions for the organisation (business related) and of the external stakeholders influence. 4.3 STURE: Specific conditions The specific conditions contain: Sustainability review o A review of the conditions specific of the site and surroundings of the building described in ecological, economic, social and cultural terms. o Input to this review is the demands of the internal stakeholders. o Relevant tools from the toolbox of Evaluation Tools are used as instrument for the review. Evaluation of significant sustainability aspects o An evaluation of sustainability impacts is done with the sustainability review as a base and significant sustainability aspects are set Documentation made during the process o The documentation procedure during the STURE-process assures the changes of the conditions of the application on a continuous basis. 4.4 STURE: Sustainability programme The sustainability programme is a result of an evaluation and optimization of the specific and the general conditions. The organisation management decides the formulation of the programme. It consists of three main parts: The sustainability objectives o Depends of the general and specific conditions. o Relevant Evaluation Tools may be used as instruments to evaluate and optimise. Prioritising of the sustainability objectives o A relative order of preference of sustainability objectives o A preparation of forthcoming relative conflicts and other demands of the application. o Depends on the organisations ability to deal with the objectives. The sustainability targets. o Objectives divided in detailed and measurable units from levels of system to levels of single components. The methods and rules of verification of the measurable sustainability targets are also established. 4.5 STURE: Applications STURE is possibly to adapt on several applications connected to the construction and real estate sector. The aim is to verify all the sustainability targets according to the methods mentioned in the sustainability programme. Divergence and change of verification are a part of the documentation procedure.

STURE and the sustainability information from the model is possible to use in a continuous sustainable real estate management as, for example, basics for operation and maintenance, input to the organisation s environmental management system and information to users, tenants and to other important stakeholders. 5 Model verification This verification of the STURE model is based on a case presented by Persson (2003). The case concerns a company with six real estate properties situated in Sweden. One property is an office building of 3700m 2, and the others are apartments for rent of 9700m 2. The buildings were erected between 1950 and 1972. The project consisted of introducing a new real estate management strategy, with more focus on the sustainable construction aspects. 5.1 Stakeholder analysis The following stakeholders were identified as relevant for the projects completion: Internal o The real estate owner o The property management contractor o Tenants External o The national government o The Swedish Ecocycle Council for the building sector o Creditors The real estate owner saw the need to be more efficient in their real estate management process. To achieve this, they chose to develop a real estate management process with the focus on a sustainable development. The National Government had specified the national goals of sustainability, which then had been developed and adapted to the construction and real estate sector by the Swedish Ecocycle Council. 10 6 1 5 Power 2 4 3 1 1 Level of interest 1. The real estate owner 2. The property management contractor 3. Tenants 4. The National Government 5. The Swedish Ecocycle Council 6. Creditors 10 Figure 3 The power / interest matrix However, in order to be successful, the real estate owner needed the support and interest from the property management contractor and the tenants. In addition to this the creditors with claims on the property, was interested to ensure that the change did not affect the real estate owners possibility to fulfill their commitments. The analysis shows that the real estate owner had little or no external conditions that would be in conflict with their own specific demands. 5.2 Specific conditions 5.2.1 Environmental review An environmental review with a Swedish commercial criteria based method (Tyréns Byggekologi) was done. The method is based on environmental checkpoints of the building and its surroundings and is performed by a certified reviewer. The results were evaluated regarding a number of aspects (see figure 4):

Biodiversity Water consumption Energy consumption Hazardous waste (waste of environmentally hazardous components and substances) Dangerous waste (hazardous waste regulated by national legislation) Recirculation of components and materials (re-use of components, reclaim of material and recovering of energy) Tenants questionnaire, a internal stakeholder demand (a qualitative questionnaire of the tenants subjective experience of the indoor environment of the actual building) Electro-magnetic radiation (measured) Noise Light Radon radiation (measured) Indoor climate 100% 80% 60% 40% 20% Biodiversity Water cons. Energy cons. Hazardous waste Dangerous waste Recirculation Tenants quest. Electr.magn.rad Noise Light Radon rad. Indoor climate 0% 1 2 3 4 5 6 Figure 4 Environmental aspects in relative comparisons of the six properties By an evaluation of the aspects in relative comparisons of the six properties, (figure 4), energy consumption, environmentally hazardous waste and indoor climate were the most significant environmental aspects 5.2.2 Sustainability review A sustainability review of the property sites and surroundings was done according to Persson 2001 and 2002. An evaluation concerning the significant ecological, economic and social aspects gave this result: The significant ecological aspects were in terms of local climate, predominant wind, solar radiation, humidity, temperature and local air pollution. The significant economic aspects were in terms of market values of the properties, values of taxation, local supply and demand of similar properties and rental charge of the tenancy agreements (external stakeholder demands). The significant social aspects were in terms of owner structure of the properties and tenancy influences on decisions concerning property use and maintenance (internal stakeholder demands).

5.3 General conditions The real estate company of the case has an environmental policy which follows the principles of the environmental management system ISO 14001 and the Environmental Programme 2003 (Swedish Ecocycle Council), see section 2. The environmental policy of the company includes: Use of energy Use of harmful substances Aspects of indoor environmental quality A commitment to continual improvements (ISO 14001) 5.4 Sustainability programme 5.4.1 Significant aspects The sustainability objectives depend on the real estate company s general and site specific conditions. To create these objectives it s necessary to optimize the significant aspects regarding both the general and the site specific conditions. The result is to be assured that various ecological, economic and social aspects are included. The significant aspects of the case are aspects from the specific conditions (section 5.2.1 and 5.2.2) and the company s environmental policy from the general conditions (section 5.3). 5.4.2 Sustainability objectives in order of priority These are optimised sustainability objectives set in order of priority and decided by the management of the real estate company: Market aspects. o Includes a business factor for the real estate company s economic survival (aspect of economy). Use of energy. o Reduces problems of resource availability, meets the Kyoto targets (ecology aspects). o Reduces the running costs (aspect of economy). Indoor environmental quality. o Aims at reducing dangerous and harmful components and substances (ecological aspect). o An important health aspect (social aspect) for the tenants and the users. Participation. o Encourages participation by the tenants to influence decisions regarding operation and maintenance (social aspect). o Reducing the cost of operation and maintenance, in a qualitative way for the long run (aspect of economy). 5.4.3 Measurable sustainability targets Measurable sustainability targets would be set regarding these objectives and the application of operation and maintenance. Defining the methods of verifying the sustainability targets is essential. The present status of the case is that the work continues with the sustainability programme including proposals of sustainability targets, kind of verifications of sustainability targets and a plan of sustainability checks concerning operation and maintenance. 6 Conclusions To manage sustainability in general, it s necessary to consider ecological, economic and social aspects and the long-term impact on the involved human beings and their surroundings. When it concerns the real estate management, it s necessary to put these three basic sustainability aspects together with the common business considerations and to have a good overall view of all the involved stakeholders demands and intentions. When a real estate company has to make decisions concerning their building stock, it s common to only consider common business-economic aspects, which often are short- to medium-term based decisions. But the objects, the real estate properties, are long- or very long-term in their life time and this common shortterm thinking affects the properties far beyond all budget frames. To taking both short- and long-term considerations, it s necessary to have some kind of tool to help the management of the real estate company in their decision-making.

A tool of this kind is the stakeholder urban evaluation model (STURE). Using STURE implies an optimisation of the actual properties significant sustainability aspects, relevant stakeholders demands and the managements organisationally ability and knowledge to deal with sustainable long-term issues. This paper shows the principle of STURE and a case of small-sized real estate company using STURE for the long-term strategy of their existing building stock. The result of the case indicates that STURE could be one model to deal successfully with long-term sustainable management of the existing building stock. However, the use of STURE needs to be evaluated in more case studies and needs to be adjusted with regional and local conditions as well as with different kinds of evaluating tools. Another benefit for the real estate company when using STURE, is that the model could be a tool for fulfilling the continual improvement commitment of the company s environmental management system. References Beinat E. 2001. Multi-Criteria Analysis for Environmental Management, Journal of Multi-Criteria Decision Analysis 10 (2001), 51. Boholm, Å et al. 2000. National Objectives Local Objections, CEFOS, Gothenburg University Cleland, D I. 1999. Project Management Strategic Design and Implementation, 3 rd edition, McGraw-Hill Dodgson, J et.al. 2001. DTRL multi-criteria analysis manual, http://www.nera.com/elibrary, NERA Ecocycle Council for the Building Sector. 2004. The Environmental Program 2003-2010 http://www.kretsloppsradet.com/bmp2003.asp Environmental objectives portal. 2005, http://www.miljomal.nu/english/english.php European Commission, The final report on sustainable construction, 2001 http://europa.eu.int/comm/enterprise/construction/suscon/finrepsus/sucoex.htm Johnson, G and Scholes, K. 1999. Exploring Corporate Strategy, Prentice Hall Europe Mendelow A. 1981. Environmental Scanning: The Impact of Stakeholder Concept, Proceedings of the Second International Conference on Information Systems, December 1981, Cambridge, Mass National Board of Housing Building and Planning (Boverket), 2005. The dialogue project Building, Living and Property - Management for the future, http://www.byggabodialogen.se OECD. 2002, Design of Sustainable Building Policies, OECD, Paris. Olander, S. 2002. Consensual Approaches to Siting Controversy, Proceedings from the 10 th International Symposium on The Organization and Management of Construction, University of Cincinnati, CIB, CRC Press, (2003), 909-920. Olander, S. 2003. External Stakeholder Management in the Construction Process, Division of Construction Management, Lund Institute of Technology, Lund. Persson, U. 2001. Att styra ett hållbart byggande En definition av och en styrmodell för ett hållbart byggande (Swedish Only). Department of Construction Management, Lund Institute of Technology, Lund. Report TVBP-01/1011 Persson, U. 2002. Managing sustainable construction- a steering model for the building process. Proceedings, Sustainable Building 2002 International Conference, Oslo, Norway, CD-ROM Persson, U. 2003. Managing sustainable real estate development - a case of an SME real estate company. Proceedings, Construction Economics and Organization, 3 rd Nordic Conference, Lund, Division of Construction Management, Lund Institute of Technology, Lund University Persson, U. and Olander, S. 2004, Methods to Estimate Stakeholder Views of Sustainability for Construction Projects. Proceedings, Plea2004 - The 21th Conference on Passive and Low Energy Architecture. Eindhoven, The Netherlands Pomerol, J C and Barba-Romero, S.2000. Multicriterion Decision in Management, Kluwer Academic Publishers Tyréns Byggekologi, 2005, Environmental assessment of properties (Miljöbedömning av fastigheter). http://www.miljobedomning.com/start/index_help.asp