Our Thoughts
Wed, 31/05/2023 - 12:00
· 4 min read

As sustainable building targets multiply, can real estate meet them all at once?

A sustainable building can be different things, whether in the eyes of the government, an occupier, or an investor. Satisfying them all simultaneously in the most cost-effective way presents developers with an unprecedented challenge.

Even meeting the government’s proposed, gradual tightening of the Minimum Energy Efficiency Standard (MEES) will prove too much for many property owners. More than half of inner London’s commercial stock will be severely impacted by 2027 without a massive surge in retrofitting, according to our research.

The latest round of the  MEES rules came into force last month, so it naturally draws the attention, but the pitfalls of benchmarking performance against Energy Performance Certificates have been well documented and their influence is likely to eventually wane. The difference between a building’s potential performance as it has been designed – as measured by EPCs – against its real-world performance can be significant, which is why retrofitting and sustainably developing with other goals in mind is so important.

Net zero carbon is already the focus of many occupiers and landlords, and it’s feeding into their real estate choices. More than 2,600 companies have set science-based emissions reduction targets and 1,800 have made net zero commitments. Those numbers include major financial institutions and enterprises who carry significant value, and the total number of companies taking action is growing rapidly.  With increasing utility costs more companies are focusing on energy usage and we anticipate that more companies will accelerate their drive towards net zero.

Preparing for both incoming regulations and the shifting desires of occupiers requires developers and landlords to make commitments with incomplete information – particularly when it comes to net zero. Questions remain as to what even constitutes a net zero building, for example. Making significant investment decisions under these circumstances while materials costs are rising understandably fuels caution, but the gains for the early movers could be substantial.

A new framework

We at BNPPRE have developed a framework to remove much of the uncertainty. The aim is to map out a set of optimised upgrades over a building’s lifecycle that hit several goals simultaneously, whether it is MEES, net zero or other initiatives such as NABERS. By considering the impact each upgrade has against those goals, creating a schedule of possible solutions and forecasting the asset’s performance, we’re able to establish the most cost-effective and optimised upgrade and retrofit programme.

At its core, this framework is an organisational solution for solving multiple complex problems that can be applied at asset or portfolio level. It leverages both retro-fitting and collaboration with occupiers to achieve various goals through an asset’s lifecycle

This approach is important because we’re increasingly finding that a one off retrofit exercise alone isn’t the silver bullet many hoped it would be. A golden thread of deep and continuous collaboration with a wider pool of operational stakeholders, especially occupiers, is key to closing the performance gap, decarbonising, and crucially hitting both the asset’s and the occupier’s net-zero targets whilst reducing energy consumption and costs.

Other key features of the framework include maintaining a core team and monitoring governance. Having a core team consistent throughout an asset’s lifecycle is vital to ensure the process stays on track. With so many moving parts, governance is also crucial; clear roles, responsibilities and accountability paired with a project manager orchestrating the process are required to maintain momentum, capitalise on changes and ultimately deliver.

New guidelines

We hope that the framework will become best practice, underpinning design decisions as prevailing uncertainties over net zero are resolved. Indeed, many questions will be answered by the incoming Net Zero Carbon Buildings Standard, due for publication later this year. The Standard will hopefully set out metrics by which net zero carbon performance is evaluated, as well as performance targets or limits based on the industry’s required decarbonisation trajectory.

Crucially, those performance targets will align with science-based trajectories needed to achieve net zero by 2050, while also keeping to the energy demand reductions that will be required to enable a net zero carbon energy supply sector.

The guidance publication will constitute a watershed moment for the industry. We’ll finally have much greater certainty over how to balance energy use, upfront embodied carbon, and lifecycle embodied carbon while considering metrics such as space heating/cooling demand and peak load. The guidelines will also cover the approach to carbon accounting, procuring renewable energy, and the treatment of residual emissions, including carbon ‘offsetting’.

Capitalising on information this granular will require even greater collaboration between professionals at earlier phases – we see it as a trend that will grow more important over time. Occupiers will  play a bigger role in those conversations, too. After all, investment decisions must be accompanied by the right behaviours if a building’s potential is to be met.

We hope our framework will provide a foundation for all of that – and will prove that it’s possible to work towards multiple sustainable building goals at once, no matter how ambitious they are.

This article first appeared in CoStar on 31st May 2023.

As sustainable building targets multiply, can real estate meet them all at once?