By Rebecca Pearce
EMEA Head of Sustainability at CBRE
Much has been written about ‘Smart Cities’ in recent years. The concept is simple – better data, better technology and better connectivity will aid the future of sustainable urban growth. Essentially the challenges our cities face today are not new, and will not be dealt with through technology alone. We need our cities to provide shelter and security, food and water. They must be flexible to cope with population increases, urban consolidation and migration and allow space for industry and commerce.
Today, these challenges may require some new tactics to deal with the scale of impacts we face and the pace of change. The sheer number of people in our urban environments – by 2050 the UN predicts the global population will reach 9.6 billion, the majority living in cities – the unpredictability of severe weather events and other climate change issues creates new problems and new solutions. The way we do business is also changing – some estimates predict that 60% of jobs in 2025 do not exist yet, creating new requirements for flexibility and innovation in the built environment. These factors need to be considered from both a proactive perspective – as we plan new communities and re-engineer existing precincts – and a reactive one as we seek to manage, and mitigate risks.
Whilst urban planning theory holds that cities are holistic systems, the nature of property ownership means that issues of sustainability are often addressed one building at a time. Certainly a large proportion of our sustainability services at CBRE involve improving the resource efficiency and environmental impacts of individual buildings, with demand from owners and investors on the rise.
In the European Union an ambitious climate change policy has set targets and legislative frameworks around energy efficiency, emissions reduction and low carbon generation. In turn, this has driven property owners towards “sustainable property” as a means of avoiding obsolescence, adhering to legislation including meeting minimum energy efficiency standards, and ultimately creating competitive advantage.
The former, risk based approach to sustainable property is reflected in a recent EMEA Investor Intentions survey carried out by CBRE – in which 70% of respondents, spanning fund & asset managers, pension funds, insurance companies, sovereign wealth funds, REITs and private equity or venture capital firms, stated that sustainability is either ‘critical’, ‘one of the most important criteria’, or ‘definitely matters’ in the asset selection process. These results also demonstrate that owners and developers need to improve, and adapt, their existing commercial property to avoid diminishing future investment appeal and transaction value. If realised, a focus on existing buildings could provide extremely effective economy-wide carbon reduction solutions, especially given that 80% of the buildings that will be in existence, or ‘alive’, in 50 years have already been built.
Concurrently, with increasing investor attention, occupiers concerns are increasingly focussed on aspects of sustainable property that directly impact their business. As a result, more importance is placed on attraction and retention of staff and the productivity of the workforce as influenced by their health and wellbeing. These aspects can be influenced by sustainable building features e.g. increased fresh air in ventilation systems, thermal comfort, access to natural lighting and views, quality artificial lighting, all of which need to be balanced with energy efficiency and cost reduction.
The movement toward sustainable property for investors, owners and occupiers is to be commended and encouraged, but we must also acknowledge that city scale problems cannot be solved one building at a time. In any case we cannot rely solely on built environment solutions. We all have our part to play in creating a smarter, more sustainable city, and all stakeholders need to take responsibility to make places for healthy and happy human beings.
The role of urban planners and appropriate governance structures cannot be underestimated. A truly sustainable city can only be achieved through the application of a balanced and holistic approach that responds to the specific environmental and economic circumstances. From a sustainable property perspective this would involve consideration of issues such as:
· Private v public space
· Commercial floor space or the number of housing units v open space and areas for food production
· Resource efficiency v human health and wellbeing
· Shareholder returns v responsibility and long term contribution and
· A budget surplus v government investment in green infrastructure
All city stakeholders, including property investors, owners and occupiers, need to buy in to this process and acknowledge that long term value for society may mean slightly less short term profit for individual enterprises. This is the concept of “shared value”, which also implies shared responsibility and investment as is often demonstrated in the sustainability and corporate responsibility approaches of leading businesses.
Examples of this approach being demonstrated by some of our clients at CBRE include:
· Commercial developers spending extra to construct a sustainable building
· New communities built with fewer dwellings, or less floor space, but incorporating biodiverse green spaces, legacy projects and shared facilities
· Investors prioritising Responsible Property Investment performance when deciding who manages their money and which buildings they invest in
Nevertheless we have a long way to go. To really drive change the property and finance industry needs to develop better ways to assign value to the elements that differentiate a sustainable city, and communicate these effectively to promote uptake and collaboration.
The Royal Institute of Chartered Surveyors (RICS) now mandates that sustainability features are considered in building valuations but we are still a long way from expressing the value differential of a more sustainable building in financial terms. The notion of assigning value to “natural capital” – the natural environment and its available resources – is also increasingly discussed. We need to extend this assessment to include the value of community infrastructure, social benefits and the impact of “the spaces in between” our buildings.
By acknowledging and measuring the benefits of greener buildings and more ‘liveable cities’ we can start to reward those who invest in them and encourage others to do the same.