| The jury is still out on whether improving the energy efficiency credentials of new buildings can enhance returns. By Elisabeth Jeffries  One of central London’s most futuristic office blocks might seem an unlikely place to look for bats, but one of the UK’s biggest property developers, British Land, says it will fit nesting boxes to the roofs of 201 Bishopsgate, a 12-storey tower under construction in London’s financial district. The company wants to support wildlife and has pledged to go carbon neutral by 2008/2009. Its new buildings will need to exceed existing fuel and power conservation regulations by 20% in order to qualify for an “excellency rating” under the Buildings Research Establishment Environmental Assessment Method, a voluntary UK architectural standard.
“We want to have the reputation that goes along with good environmental performance,” explains Claudine Blamey, British Land’s corporate social responsibility manager. “I haven’t seen any data to say the rent can be higher as a result of the rating, though that might be on the cards.” Given that the innovations at 201 Bishopsgate do not add a cent to the value of the property or its rent, estimated at €62m annually in a building worth about €1bn, they might appear to be little more than a token gesture. Blamey is convinced it is worth making the effort, however. “The overall benefit to us is that it can help us occupy the building. Our buildings are shortlisted a lot more,” she explains. Uwe Switala, who is in charge of the 201 Bishopsgate team, adds: “Going green does not always mean incurring high extra costs. It depends which elements you’re looking to improve.” The luxury of being able to choose whether or not to go green is unlikely to last, so early adopters will at least be better placed to stay one step ahead of the regulators. A European energy efficiency policy and the Energy Performance of Buildings Directive (EPBD) will obligate organisations to comply with minimum energy standards for new buildings and large existing buildings from 2008. An array of policy instruments is already being implemented throughout Europe. The UK recently introduced a 40% improvement in energy efficiency, for example, while in France new laws ban air conditioning at certain temperatures. France has been quietly energy-conscious for some time. In the early 1990s, the country introduced a voluntary Haute Qualité Environnementale (HQE) property label. Developer Klépierre, which applies the HQE to its buildings, is creating an international sustainability benchmark for shopping centres at Aubervilliers that covers construction site disturbance, recycling, architectural integration, green spaces, thermal comfort and energy savings. “Taking a view of the whole life cycle is the biggest problem,” says environment manager Thibaut Vouters.  This attitude is increasingly being adopted in southern Europe. Sonae Sierra is an innovative Portuguese constructor of shopping centres that is developing its own independently verified Green Shopping Centre Standard. Its more unusual ideas include an organic composting initiative at its Portuguese centres, an energy inventory at all sites and a 10% cut in greenhouse gas emissions at shopping centres by 2020.
On energy savings, Germany is in the lead with its stringent, updated Energieeinsparverordnung (EnEV – energy savings regulation), which dictates the types of energy calculations to be made and reported for buildings ranging from schools to airports. Voluntary measures have been in place for years. “Energy prices are much higher in Germany than in other countries, and many investors accepted some time ago that higher upfront costs lead to longer-term lower operating charges,” says green buildings expert Peter Moesle of design firm DS-Plan. The EPBD is likely to have a lasting influence by stimulating market differentiation according to environmental performance. Companies such as Dutch bank ING, for example, make much of their environmental credentials. ING’s 50,000 m2 Amsterdam headquarters – which integrates passive solar heating and ventilation and “waste heat capture” – has led to a reported 92% reduction in primary energy use, a 15% fall in employee absenteeism and an estimated energy saving of €2m. In many cases, however, the matter of who actually carries the cost of better energy efficiency, and who benefits, is less clear cut. If the developer also occupies the building, they will reap the benefits; if they don’t, the tenant will come out on top. The other big unresolved issue is what to do about older buildings. “Buildings are designed for specific parameters and energy use. To change that later is very difficult,” says Switala. Underlining this point, Richard Kauntze, chief executive of the British Council for Offices think-tank, notes that new developments in the UK account for just 1% of office blocks. “At this rate it will take a century to rebuild offices to new standards,” he asserts. The European Commission has indicated that by improving energy efficiency, carbon emissions from buildings could be reduced by as much as 22%. For now the main stumbling block is cost, particularly where older buildings are concerned. In urban areas it is unlikely that extras like wind turbines and photovoltaic panels will become common, and in taller buildings, the roof area may not be large enough for solar panels to be cost-effective. For now, businesses will have to rely on government grants, sustainability bankers or firms that create innovative financial structures allowing capital costs to be paid for by future energy savings.  Governments suggest that more legislation is likely to be introduced in the coming years. Service companies might find themselves included in an extended European emissions trading scheme, which would impose more environmental costs.
Meanwhile, the development of new options such as responsible property investment portfolios shows that some are acting already. As the environmental issue gathers pace, it seems the property sector can no longer dodge the green block. Over the past decade we have seen the carbon debate move from whether climate change is happening to how it can be arrested and how quickly. The UK’s commitment to reducing carbon can be seen in the introduction of tough new laws that are going to govern the imminent Energy Performance Certificates (EPC) for buildings. EPCs result from the European Union Directive on the Energy Performance of Buildings, inspired by Kyoto. Worryingly, there is a general lack of awareness in the property market of the potential impact EPCs are likely to have on the market when they are introduced on 6 April, 2008. The intended use of these certificates will be to act as a differentiator, in terms of energy consumption, between otherwise similar buildings, both new and old. This should enable potential investors or tenants to consider carbon/energy performance in their decision making. Information gathered on properties’ energy performance may be used to establish a form of energy taxation in future, so that properties with poor energy ratings will be subject to higher taxes. There is scant information as to how existing buildings will have their energy performance measured, and this could be a major obstacle to the introduction of EPCs across the much bigger refurbishment market. Landlords will be responsible for the production of EPCs. Public sector occupiers will have to display EPCs from 6 April, 2008; private sector properties will be required to produce but not display EPCs from 1 October, 2008. There is no doubt that EPCs are a step in the right direction, but larger strides are needed. In January this year, the European Commission announced plans for an energy policy that included a unilateral 20% reduction in greenhouse gas emissions by 2020. All those involved in the built environment need to take action now; the clock is ticking. Richard Kauntze, chief executive, British Council for Offices |