At the turn of a new decade, there is one story that sends out a powerful message about how the real estate sector should order its priorities.
News headlines are dominated by the devastation being caused by Australian bushfires. From pictures of charred animals clinging to burning trees to whole towns on fire, the world’s spotlight is firmly set on these unfolding events.
This sobering start to the year could set the tone for property’s approach to the sustainability agenda over the coming years, according to JLL’s UK chief executive, Chris Ireland.
As coverage of climate change increases and public awareness is raised, property – which according to the United Nations accounts for 40% of the world’s energy consumption and a third of all carbon emissions – needs to act fast. Although progress is being made to tackle the issue, Ireland said industry collaboration is key.
Occupier demands
“One of the biggest changes [during 2019] has been the recognition from the industry of the importance of sustainability and the climate emergency,” Ireland said at the agency’s 2020 Property Predictions event, adding: “The real impact we can make as a business is working with occupiers, investor clients, to help embed sustainability across all of your portfolios.”
Also speaking at the event, Lloyds Banking Group head of real estate and housing, Madeleine McDougall, said that the sustainability agenda is “at the forefront of all decision making” when tenants are viewing a prospective workspace. She added that developers will struggle to get backing for new schemes if they are not sustainable.
“What has been shown is that tenants now absolutely want to know that you’ve thought this [sustainability agenda] through,” she said. “If you haven’t thought this through, tenants will not want to occupy those buildings and banks won’t finance those buildings – because what we want to know is that the building will not be obsolete and that there will be a life cycle to them.”
Diageo is one such tenant that places sustainability high on its list of priorities when looking for workspace. The company has pledged to reduce its carbon footprint by 50% and choosing office space wisely is one way of helping to achieve this goal.
Last July, the drinks company announced it would move its global headquarters to central London at 16 Great Marlborough Street, W1.
Diageo is partnering with landlord Lazari Investments to retrofit the building to make it greener.
Ground swell of interest
Why is the company placing such importance on this issue? “One of the biggest drivers were employees,” said Steve Harris, Diageo’s global governance and corporate real estate services director. Harris said that there has been a “ground swell” of interest among staff about the issue.
“We did an awful lot [of work on sustainability] from 2007 to 2015, and then interest died off a little bit,” Harris said. “But now it has come back with a vengeance.”
Bill Hughes, Legal & General Investment Management’s head of real assets, said that refurbishing existing buildings to make them greener is where the difficulties lie.
“As much as we talk about new buildings, for us, that’s roughly about 10% of what we do,” he said. “The big challenge for us is how do you retrofit the existing building stock in the UK in such a way that we can get towards zero carbon in a timeframe – and I agree 2030 targets should hold.”
JLL’s UK head of sustainability, Sophie Walker, set out the benchmark that the industry should be meeting as it enters a new decade. “If you don’t have a net zero carbon strategy in place, you really need one,” she said. “If you don’t have a net zero objective going into 2020, I would fundamentally query that. That should be an expectation for the whole sector.”
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