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As the property market takes a dip the time is right to buy into sustainability

ImageFor years the construction of energy-efficient buildings has fallen foul of a ‘vicious circle of blame’. Will the credit crunch provide the chance to finally break that circle?

“I think the credit crunch has helped the sustainability agenda. Last summer we were still in a period of comfort and opulence. We have put the handbrake on very quickly, and gone straight into sustainability and efficiency. Without going through anything in between.”

That verbatim quote is from a building occupier at a financial institution, speaking at an expert focus group organised by the law firm Taylor Wessing. It appears in a fascinating new study into the attitudes of the property industry to the sustainability agenda, published in January.”

Called ‘Behind the Green Façade’, the study surveys the views of over 800 people, each concerned with commercial buildings. Included are investors and funders, developers, contractors, architects and planners, commercial agents, and end users. In every one of these professional categories at least one hundred different peoples’ views were obtained for this publication during last autumn.”

The picture it paints is one of a genuine willingness to respond to the changes that resource constraints and climate change concerns present. Yet coupled to this willingness is confusion and distrust as to just who should be making the first move. And even what that move should be.

Self-perpetuating circle

For years, attempts to make our non-residential buildings more energy efficient have run up against the “vicious circle of blame”. That is a self-perpetuating cycle, when:

  1. end users claim that not enough sustainable buildings are available;
  2. designers and constructors say that developers don’t ask for sustainable buildings;
  3. developers assert investors wont pay for them; and
  4. investors claim they would respond, if only there was demand from end users.

Looking at the statistical details provided by this survey confirms this “vicious circle” still exists. But it may be getting wobblier. In each sector, a majority recognise the challenge before them. But as the publisher comments, “all sectors of the industry need to be able and willing to buy-in to the sustainability agenda, if targets are to be met.”

There seems widespread, if often superficial, knowledge of the existence of energy performance certificates (EPCs), display energy certificates (DECs), and the imminence of ever-tightening building regulations, covering both new and existing buildings.

Change in external factors

For that general awareness to be turned into positive action, a variety of external factors need to change. Some 57 per cent of professionals believe incentives such as tax reliefs or grants will be needed to compliment the present regulatory pushes which respondents acknowledge to be the main drivers at present – and that these are fewer for existing buildings.

But in addition, the values and benefits of responding need to be communicated to relevant industry sectors, using commercial language as opposed to jargon words like “zero carbon” or “sustainable development.”

As one developer is quoted as saying: “The word sustainability itself causes problems. If I say to an agent ‘Does your client want sustainability?’, they will respond ‘No, it costs too much money. They are not interested : it is additional cost’.

“But if I turn to the same agent and say ‘Does your tenant want lower running costs, daylight, good views, better retention of staff, better productivity?’ Then the answer is ‘Yes, absolutely I want all that.’ That is sustainability.”

Acceptable premium for sustainability

There is a statistically significant distinction in response to the 1 in 5 who think the typical corporate occupier will never pay any extra cost for an energy efficient building. And the just 1 in 8 of actual end users who fear that is the case. As another developer warned: “How much more sustainable is a developer wiling to make a building in order to secure a tenant?”

Again, 3 out of 5 end users think that a 5 per cent rent premium would be acceptable for a sustainable building. Whereas only half of the other professionals consulted believe that to be possible.

The publishers ascribe this more enlightened response to “enhanced public pressure, the rise of corporate responsibility, and the need to attract and retain a new generation of socially conscious employees.” Certainly respondents under 40 seem significantly “greener” in their attitudes.

It may be that a two-tier market is evolving, for sustainable and non-sustainable building stock. The more familiar the A to G coloured ratings become, the more likely this is.

As the building occupier quoted at the start suggests, the likelihood of this occurring may increase in a more cautious financial climate. Even as development financiers begin to factor sustainability criteria, backed by legally enforceable contractual commitments, into their fundamental economic calculations.

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