New York City has woken up to the urgent need to reduce carbon emissions from existing commercial properties, writes Sonny Masero. Investors now know that the returns from almost every property asset will be reduced if the increase in global temperatures exceeds 3°C, compared with pre-industrial levels, as a result of global warming.
At present we are on course for an increase of between 3.1°C and 3.5°C and we have only 12 years left to have a chance of averting that outcome.
In October, the scientists of the UN’s Intergovernmental Panel on Climate Change warned we shouldn’t exceed 1.5°C if we want to prevent an environmental disaster. Last month, the global average temperate was 1.3°C higher.
In property terms, 12 years is not very long. It can take seven years to get a planning application approved, let alone to complete a new development. The developments which are being thought up now have to be ready for a future with a changed climate.
Action needed
It is the existing properties, which will still be here in 12 years, where action is needed now and in the coming years – to mitigate carbon emissions and to adapt to changing weather conditions.
The average lease length today is seven years, meaning perhaps only one opportunity in 12 years for a major refurb.
There are already very visible signs of extreme weather conditions becoming more frequent. The Beast from the East froze and cracked water pipes, causing leaks in properties, and heavy rains have caused severe flooding. While fires may be the biggest cost for a commercial property insurance claim, water leaks and water ingress are by far the most common peril already.
These are the most direct impacts on properties and the people who occupy them. The impacts of climate change will be much broader than this, which is why property investors are being encouraged to consider these risks.
Better Buildings Partnership compared the actual performance of commercial properties with their EPC ratings. It showed the median for F-rated properties was more efficient than for A-rated ones
The Taskforce for Climate-related Financial Disclosure has already published guidance, and future scenarios are being developed. Weather conditions and the efficacy of property operations will be key risk factors for property investors.
Properties account for approximately a third of global CO2 emissions. Most of these emissions come from the operation of the properties – in the main, the energy they consume, the gases used in the air-conditioning systems and the waste.
Performance gap
In 2016, the government published the Building Performance Evaluation Programme report. It was the conclusion of a four‑year, £8m study into 50 properties. The results showed that there was a gap between the design goals of commercial properties to limit the carbon emissions expected for Building Regulations compliance and their actual performance. None of the properties that were studied operated the way they should. On average, they produced 3.7 times more carbon emissions than expected.
Further evidence of this performance gap has been uncovered by the Better Buildings Partnership’s annual Real Estate Environmental Benchmark programme. This compared the actual performance of commercial properties with their Energy Performance Certificate ratings. It showed there was little correlation and that, in the sample, the median for F-rated properties was more efficient than for A-rated ones.
Both reports found that the building control – via the building management system (BMS) and the heating, ventilation, and air conditioning (HVAC) operation – was the main contributor to the higher emissions. It is these building systems which also determine whether the building occupants have comfortable and productive internal environmental conditions. If those systems are not working correctly, it affects the people as well as the planet. Building systems analytics can provide data intelligence to pinpoint where action is required.
Improving the efficient operation of properties is something that can be done now. It will have an immediate impact on reducing operating costs, improving customer service and reducing carbon emissions from properties to tackle climate change. The savings in a single commercial property can be several hundred times greater than reducing emissions in a home.
Given our need to act within the next 12 years, using data analysis to do this in commercial properties would be a good place to start.
Sonny Masero is chairman of Demand Logic
