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Progressing the carbon conversation - a strategy to turn talk into action
While COP27 wraps up later this week, important conversations highlighted throughout the summit will hopefully keep momentum and continue to spark tangible change. Funding the green evolution remains a hot topic in property, and one we need to progress despite competing financial pressures facing occupiers, developers, and investors.
As a strategic advisor, we are bringing occupiers to the table to have conversations with their landlords about ways to reduce carbon emissions in the buildings they occupy and, most importantly, how to fund any works needed to implement these changes.
Engagement and collaboration are key drivers to moving the green evolution forward and making real impact in this area. A “one size fits all” approach won’t work – lease length, lease terms and benefit all need to be considered, but our strategy helps to kickstart discussions.
3 key stages to progress your carbon conversation
1. Engagement
Ask your landlord what their climate commitments as a business are. Knowing what they have committed to will help you when evaluating what is happening at the site you occupy.
In addition, find out what they are currently doing and what they have planned for your building to reduce carbon emissions.
Data is key and the collation of this data from your landlord is essential in helping you form a picture of what is currently happening, whether it be through an Energy Performance Certificate or collation of existing and planned carbon reducing initiatives in place.
Also notify your landlord of your own climate ambitions and provide any data that you have. Sharing your data with your landlord enables further collaboration.
2. Analysis
Once you have the data, analysis of the information supplied can be used to identify further inroads for reducing carbon emissions and mitigating utility costs. Measuring the varying parameters such as energy usage and whether energy is renewable can help in choosing the best areas to focus on.
3. Engagement and Collaboration
Follow up by having a discussion with your landlord on the long and short-term options available to reduce carbon emissions at the building and how these could be funded. Joint projects to enable tenant demises to become evolved alongside the building can further improve efficiencies. Ensuring each demise is in sync with the building as opposed to operating as a separate entity is the best way to create fully functioning, synchronised green buildings.
What does it look like in practice?
Being part of the conversation allows tenants to have a say in the future of the building they occupy and gives landlords the opportunity to explain the cost benefit of any planned works as well as potential pay back and details of the carbon – and occupier - benefits. Where little action is being undertaken, occupiers are able to lead the conversation and influence landlords to make changes and commitments.
Each occupier will have different requirements depending on factors such as their occupancy type, lease and what benefit they believe they can derive from projects, but engagement and transparency are essential in moving the green evolution in property forward in a beneficial and unified manner.
In our experience, occupiers are more likely to agree to fund or part fund works that align with their own requirements and commitments. Encouraging tenants to understand the benefit as well as their responsibility as occupier in the future of the building will have a positive impact.
Examples of where we’ve been doing this
We worked with a leading international financial institution, undertaking a strategic review and collating data on their occupied portfolio including:
- What landlords were doing to reduce carbon emissions at each site
- What further initiatives were being considered
- Obtaining Energy Performance Certificates for each site
- Gathering details of waste and recycling initiatives in place
- Sourcing information on lighting systems such as whether LED lighting and PIR sensors were in place throughout the site
- Finding out if renewable energy was being used
- Seeing whether electric vehicle charging points were installed or being considered at the site.
The information received was analysed and the findings shared with the client on each of the buildings they occupied. We were able to advise on cases where minimal inroads were being made and, in some instances, where nothing was being done at all so targeted conversations could be had with landlords.
We also highlighted landlords who had made climate commitments as they would likely be receptive to conversations to further improve efficiencies at their buildings. Next steps were categorised from relatively easy and small changes to larger initiatives, alongside potential costs and likely pay-back.
One priority for the client was to establish the availability of EV charging points in their occupied buildings. Data collected on existing provisions and planned installations allowed them to formulate a list of which sites to prioritise for further discussions.
Results: The data set we collected for our client was included as part of their COP26 document and was integral to their commitment to tackle climate change. Our review enabled them to have a fully rounded approach to their climate commitment.
Final thoughts
Occupiers often think that their hands are tied in the buildings they occupy, but our strategy helps give occupiers a voice in the green evolution and allows them to influence their landlords to be making changes and talk about the elephant in the room – how those changes will be funded.
UK utility costs are on the rise: Three ways occupiers can act today to lower energy consumption
The increase in UK household utility costs has been the subject of many recent headlines.
The Office for National Statistics (ONS) reports that the wholesale price of gas in January 2022 was almost four times higher than early 2021, putting pressure on the energy industry and increasing household bills for both gas and electricity as a result. This is clearly a concern and a growing factor in the squeeze on household budgets – but how are commercial occupiers affected by the price hike?
Rising tariff rates and costs impact occupiers’ demised utility costs and the common parts utility costs recovered through the service charge.
For demised utility costs, in most cases the occupier is responsible for the tariff in place. The occupier can implement and control policies to mitigate unnecessary usage and waste to minimise cost increases and reduce usage. Reducing usage is key to decreasing carbon emissions where energy is generated by non-renewable methods.
However, for common parts utility costs, procurement and supply are dealt with by the landlord or their agent, and do not involve discussions with the tenant. When the landlord is making the decisions, it can be difficult for commercial occupiers to influence the changes they would like to see.
How then can commercial occupiers influence landlords to reduce common parts utility costs and usage where possible?
It starts and ends with clear communication around sustainability commitment, goals and milestones.
Occupiers and landlords may likely have shared sustainability commitments and goals towards their rented or owned real estate. Avison Young, for example, is committed to reducing carbon emissions to net zero across its UK occupied buildings by 2030, and we are focused on guiding our clients to achieve similar commitments through a holistic approach that examines costs as well as environmental impact.
If they haven’t yet, we predict they will.
Once identified, make sure your goals and priorities are clear and known.
Those looking to meet the rise in energy costs could see market conditions now as the perfect, advantageous time to expedite already priority efforts around more energy-efficient and lower carbon emissions systems, bringing these topics more to the forefront of conversation.
To make it all work, engagement is required from all parties, speaking honestly and candidly about goals and steps necessary to take meaningful action now to meet the short-term goals of driving costs down against the market, and long-term appeal of implementing policies that are net positive toward climate change goals.
How will it all look in practice? It will be different for everyone. Each property is unique, and the initiatives that can be implemented will vary. A consultative mindset and consideration set aimed at meeting the property where it is today with a plan that takes them where they need to go with flexible offerings and options will be key.
That said, there are a few ways all occupiers can begin needed work today, with small but powerful steps.
How can real estate occupiers take action today to begin driving meaningful, energy efficient action?
1.Switch older bulbs out for LED solutions.
Incandescent light bulbs began to be phased out in 2009, as they were inefficient and lost a large proportion of their electricity usage as heat. Compact fluorescent lamps (CFL) became popular – although they were more expensive in comparison, they used less energy and had a longer life span. At the time, LED lights were relatively new technology and as a result expensive.
Now, they are much more accessible in terms of availability and cost and are much more environmentally friendly, but there is still a lag in adoption across some estates. LEDs use up to 90% less energy compared to incandescent bulbs, do not contain mercury, and have a far superior life span. Although more expensive to purchase, due to the reduction in energy usage and life span, they are much cheaper in the long run.
We are seeing various strategies with the implementation of LED bulbs. Some landlords have adopted a policy of gradual replacement, whereby LED bulbs are installed when the previous bulb reaches the end of its life span. This minimises up-front costs but does not necessarily see the same reduction in usage. Alternatively, some landlords have undertaken programmes to replace all existing lighting with LED bulbs. This does come with a greater up-front cost but is expected to see quicker returns as usage is reduced. At one Leisure Park we review, budgeted costs for electricity this year have remained at the same level as the previous. LED lighting has been implemented at the site and led to a reduction in energy usage. This reduction has helped offset rising costs and tariffs and has protected the tenants from paying a larger cost for common parts electricity. The reduction in usage also means lower carbon emissions.
2. Leverage Passive Infrared Sensors (PIR Sensor) technology to match usage with footfall.
In addition, and conjunction with LED bulbs, Passive Infrared Sensors are also being utilised to reduce energy. PIR sensors are motion detectors and allow lights to respond to activity within an area. PIR sensors can reduce energy usage particularly in areas which may have infrequent footfall, including stairwells and basement areas.
As with LED bulbs, there is an initial cost for purchasing and fitting, but a payback with reduced electricity usage in the long run. Many commercial occupiers already have PIR sensors within demised areas, and we are seeing their implementation along with LED lighting.
3. Utilise Automated Meter Reading (AMR)s to quickly identify leaks or inconsistencies in usage.
AMR allows for regular meter readings and can help detect if usage is consistently continuous, which might indicate a leak. If there is a leak that is not identified, this can result in significant wastage - and as a result an unnecessarily high bill. AMR also allows for more accurate billing as it removes the inclusion of estimated usage from bills. The data collected can further allow occupiers to identify patterns in usage which can improve energy efficiency and habits.
William Frost is an Associate Director, Service Charge Consultancy, Occupier Solutions based in our Leeds office.
