Green Dilapidations: more sustainable commercial property leases
Commercial building owners and occupiers are increasingly looking to fulfil their net zero carbon ambitions with measures beyond more sustainable development and energy performance practices. In particular, the current property leasing cycle and non-sustainable dilapidations processes are generating quantities of waste and carbon, which can be mitigated with a more sustainable approach: Green Dilapidations.
TFT’sGreen Dilapidations services are designed to help clients reduce the additional material, resources and cost associated with repeatedly fitting out and stripping out commercial property spaces over their lifetime. Taking a long-term view of tenancy, occupier and market requirements, we help our clients benefit from a more efficient, sustainable dilapidations process for both landlord and tenant.
Our support is rooted in facilitating better collaboration between stakeholders. That means the landlord and tenant of course, but also agents and the wider supply chain. Our sustainable building knowledge, commercial understanding and dilapidations expertise helps to formalise a better system as a whole.
We see a greater appetite from our landlord and tenant clients to adopt Green Dilapidations services. A notable occupier client is one of the leading property litigation practices, who we are helping to exit their existing offices in this way. Our recent seminar on green dilapidations in June was well attended by a cross-section of the industry, showing the breadth of interest for specialist advice on the subject.
It’s not just for offices either, and can be used for retail, industrial and other commercial property sectors.
With COP26 set for November 2021, a focal point for the conference will be the environmental impact of the built environment on our Paris Agreement targets for limiting global warming to below 2 degrees Celsius, compared to pre-industrial levels.
The biggest question currently facing our industry is how do we reduce the built environment’s contribution of 39% of annual carbon emissions, and 36% of global energy consumption? The World Green Building Council (GBC) is tasking ten European GBCs, including the UKGBC, to answer this question with national roadmaps for decarbonising their respective built environment industries.
Ollie Morris, Senior Associate, Sustainability, has been selected to join this effort, focussing on decarbonising commercial real estate retrofit projects. Ollie will work with a group of other industry leaders to chart a course to drive down the carbon impacts of the sector.
The UKGBC Roadmap will consist of two key components:
Carbon trajectory: A 1.5° aligned science-based trajectory for reducing built environment emissions that includes targets for relevant sub-sectors.
Report: A comprehensive report setting out the actions, policies and processes needed to manage the net zero transition in the built environment and achieve the trajectory targets, designed to complement the sector-specific roadmaps already in progress and ensure consistency between them.
What is the scope of the Commercial Retrofit Task Group?
The group’s task is to specify the decarbonisation implications of retrofit projects in commercial property and developing a timeline of solutions to bring them in to reality. This trajectory of carbon reduction targets and actions will contribute to understanding all the actions required across the lifecycle of the built environment in the UK. Furthermore, it will secure the support of relevant industry actors in delivering decarbonisation.
Specifically, the Commercial Retrofit task group will focus on three key areas of buildings’ carbon impacts:
Embodied carbon: reducing carbon emissions as a result of building construction, refurbishment and maintenance works
Operational carbon: reducing carbon emitted to heat, cool and ventilate buildings, as well as from lighting and hot water facilities
In-use carbon: reducing all emissions from services used in the course of a building’s daily operation, such as: lifts, IT systems, small power and plug loads
What comes next?
Ollie, along with the wider group will work on reviewing and updating the 2013 Low Carbon Route-Map produced by the GCB, considering the above factors against a 1.5 degree scenario.
Their recommendations will be formalised into a full report, which UKGBC will issue to the industry in a consultation this June/July, to capture a wider set of professional perspectives before presenting the findings at COP26 in Glasgow.
Following in the footsteps of the successful Australian initiative, NABERS UK Scheme (for Offices) has now been launched in the UK through the collaboration of Better Buildings Partnerships (BBP), NABERS and the Building Research Establishment (BRE). Developed in collaboration with a wide range of industry stakeholders, the scheme will enable greater transparency concerning the performance in use of UK Offices. It will play a vital role in bridging the performance gap between the design and in-use performance of UK Offices. BBP have spearheaded this launch in hope to transform the market ahead of Government consultations on energy performance disclosure within the commercial industry.
Sarah Ratcliffe, CEO at Better Buildings Partnership said:
The launch of NABERS UK marks a significant milestone for this project, but more importantly a huge leap forward for the industry in measuring and verifying the actual energy performance of UK offices. This has been a truly collaborative effort from across the industry over many years. I am absolutely delighted that we now have a scheme in the UK that will transform the market for better, more energy efficient offices.
Our goal at TFT is to optimise energy intensity in the course of building use. We do that by measuring and improving actual building performance as opposed to predicted building performance. This will in turn help developers overcome the performance gap between design and operation. In becoming a DfP Delivery Partner, TFT will integrate DfP into the delivery of building services and champion the adoption of DfP to our clients.
To find out more about the TFT approach, click here.
Sustainable value engineering: is it possible?
We’ve been thinking about how we can not only identify the goals and strategies for better climate impacts of development, but how we can act to achieve them. In particular, we’ve been examining the role of project managers and quantity surveyors to encourage improvement by design teams in an area that is often missed out on in climate talks: value engineering.
Carbon reduction in buildings has come a long way but we are still behind the curve compared to other industries. Why? Put simply, the willingness to pay for it is still lacking. Quantity surveyors control the purse strings and understand how funds can be spent wisely, but can we factor more sustainable decisions in to the process?
As part of multidisciplinary project teams, members collaborate to achieve a balance of several drivers whilst meeting the client’s brief.
Over the last year, over 1500 organisations comprising architects, engineers, contractors, consultants, and project managers have signed up to the ‘Declare’ movement[i], committing to undertake design and construction with significantly less carbon. This is a leap forward in terms of sustainable development intentions by a large portion of the built environment sector.
However, moving away from bolt on sustainability services towards integrated, holistic and sustainable system design requires a fundamental rethink of the design process. And yet one of the fundamental steps that the sector needs to take is to integrate three key gatekeepers of our build processes: project managers, quantity surveyors and the procurement chain.
Value engineering for good
In its best possible incarnation, value engineering can get the best out of a design. Some everyday examples of how value engineering can benefit the environment around us include:
Using a salvaged/reconditioned raised access floor system instead of installing a brand new one.
Prolonging the life of well-maintained HVAC systems rather than automatically replacing them because the original systems have exceeded CIBSE life expectancy guidelines.
Using natural materials to replace more carbon intensive, mass produced materials such as PVC.
Designing out components – e.g. avoiding the use of mastic and sealants to waterproof joints.
Careful modelling of building performance in use to optimise plant size.
However, at its worst, value engineering could literally cost us the earth. The decisions designers and contractors make now must move us towards Net Zero and it is fundamentally important that those in control of budgets understand the impact of changes to an optimised low carbon design. A tight specification that integrates carbon is essential for good intentions not to be undermined by contractual ‘opportunities’.
Never has a good brief been more important
Clients need to lead in their requirements for moving towards Net Zero. Our respective Declare movements demand that we design and build in the right way. However, if the same goal isn’t shared by our clients, it is quite possible that whilst the value engineering process may satisfy increases in value for cost, programme and quality, the effect on climate and carbon isn’t quantified in the same way.
So, how do we change our processes to achieve a sustainable built environment?
1. Baking and knitting skills – a Project Manager’s discipline
Firstly, project managers are responsible for a setting the tone and the ambition of the project, not to mention the considerable amount of “knitting” that has to happen between the different disciplines. Knowing that sustainability should be baked in from RIBA Stage 1, and not the last thing on the DTM agenda, or bringing in sustainability consultants purely for a planning submission, changes how sustainability is managed and considered throughout the design phase. Advocating to clients at RIBA Stage 0 for a sustainability process to be included can drastically change the project outcomes and value (Yes, even at RIBA Stage 0 there are issues that sustainability professionals can shed light on such as future proofing and circular economy!)
2. Carbon – a Quantity Surveyor’s dream
Secondly, the best Quantity Surveyors (QS) understand the balance of drivers that a design team works with and how best value is attained. Many of these drivers are qualitative and subjective. Carbon, on the other hand, is mostly quantitative* and is highly suited to being part of the QS domain. They measure what they can measure very well, and not what they can’t. Carbon needs to be another column on the QS cost plan.
*Using PAS 2080, EN 15978, the RICS Methodology and some LCA software
3. Procurement – a direct cost link we can’t ignore
Procurement is where the rubber meets the road in terms of carbon. Whether the years of low carbon design work and planning is seen through to the end of construction will be determined by how closely the procurement chain, which can be highly fragmented, follows the product and performance specification.
Designers and contractors need to bring the PM and QS communities and the procurement chain with us on the multiple sustainability narratives we are working through as a sector including: low carbon, whole life carbon and cost, and circular economy. Sustainability professionals understand how a value engineering tweak can significantly impact on these sustainability outcomes. QS professionals are well placed to understand how the desirable sustainability outcomes can impact on the other traditional client drivers. Striking that balance and finding our new normal is difficult but currently, the balance is still weighted towards cost and business directives.
Including these disciplines and specialists as part of a project’s objectives is critical to making sustainability not just a strategy, but a point of action.
Sustainable buildings: climate adaptation and whole life costing
As investors and occupiers place sustainability outcomes higher on their strategic priorities, TFT advice is helping project teams align their sustainable and commercial agendas. Here, we talk about climate change adaptation and whole life costing – two topics which directly marry up commercial and the sustainable concerns.
There are many opportunities to contribute to more sustainable outcomes across the building life-cycle, and to prove the commercial benefits of doing so. TFT Sustainability Associate, Oliver Morris, spoke at the RICS conference on this topic, drawing on TFT’s experience in project teams and as client advisers for building investors and occupiers alike.
Looking for an introduction to aligning commercial and sustainable outcomes? This article explains the importance of long-term thinking and TFT’s approach to design for performance, here.
In this article, we’ll discuss two issues which affect the whole project team and directly impact building longevity and value.
Climate change adaptation
One of the most acute risks to sustainable building performance for investors and building owners is the impact of extreme weather patterns.
The obvious impacts can include physical damage from wind, rain and flooding. But more extreme seasonal temperatures could negatively impact thermal comfort, or increase HVAC use to keep occupants comfortable through the year, which means more frequent plant maintenance or replacement.
Mitigating these risks means designing and building with future weather and climate projections in mind. The most adaptable and durable buildings will maintain their physical integrity and the comfort and wellbeing of its users – adding up to a better-performing asset in the long term.
Whole life cost analysis
In following a strategy for in-use performance, and factoring in the risks of climate change on a building’s future, whole-life costing analysis can help identify the value of building materials in terms of their contribution to a more useful lifespan.
Whole Life Costing allows us to understand the full picture of a building’s requirements across its lifecycle. It provides a commercial basis for improving specification and justifying sustainable materials or systems which improve the financial outlook across a building’s life.
By providing more transparency of potential costs through a building’s life cycle can give investors, development and asset managers more confidence in moving towards business ‘as unusual’ and realising the economic benefits of embedding sustainability as a core design principle. With the increasing Net Zero Carbon agenda within the industry undertaking Whole Life Costing with Whole Life Carbon (Confusingly the same acronym) assessments can highlight the relationship between reducing a building’s operational and embodied carbon emissions with operational costs.
These areas impact all aspects of the building lifecycle, and we at TFT have the scope to identify the opportunities and drive collective responsibility for acting on them. Challenging project teams and other stakeholders to move away from business as usual will be crucial to help us all advance better buildings for the future – and not a moment too soon.
Sustainable buildings: long-term thinking and design for performance
Sustainable buildings are no longer a specialist’s responsibility. Every stakeholder in the building design, construction, management and maintenance processes can contribute to more sustainable outcomes, so long as they work towards a common goal. They key to aligning these different roles is in matching up sustainable best practice with a better commercial outlook for the project.
TFT Sustainability Associate, Oliver Morris, recently joined a RICS conference panel to discuss how this can be achieved, drawing on our experience as part of project teams and client advisers for building investors and occupiers alike.
So how can project teams and clients contribute to more sustainable buildings and the commercial outlook for their next project?
Sustainable buildings are more valuable in the long-term
Developers and investment funds are increasingly following property strategies which prioritise long-term sustainability and occupant well-being. Their confidence is bolstered by an industry which is proving its experience in delivering these outcomes but also providing greater certainty of the costs involved. The good news is that project teams engage more fully with the proper application of sustainable design and construction principles from the outset.
However, major schemes tend to embrace this process more fully than smaller or less high-profile buildings. Budget limitations can mean that projects aim to simply meet regulations, not exceed them. The problem is that regulations are evolving continually: while buildings may still be ‘compliant’ in the future, in a market of newer and higher performing buildings those assest are at risk of becoming under-valued or stranded.
Our solution is to advocate for a beyond-compliance approach at an early stage to avoid the risk of stranded assets down the line.
TFT is a delivery partner for the Better Buildings Partnership (BBP) Design for Performance programme. The BBP aims to tackle the performance gap: the difference between how buildings are designed to perform, and how they function after the project is finished and the occupants move in.
Projects which rely on design intent alone to measure building performance, miss out on the most important indicator of success: the experience of the buildings’ users over time.
Designing for performance means gathering data on how the finished building is used by its occupants, and how well its component parts meet their needs. Operational targets can refer to aspects like energy efficiency and occupant satisfaction levels, broken down to whichever metrics are most important to the key stakeholders.
Choosing the right indicators and monitoring their performance is the best way to ensure that an asset is delivering value for its occupants, and therefore sustainable returns for its owners.
If you’d like to know about evaluating the impact of sustainable building decisions, or about climate change adaptation, our follow-up article on this topic is here.
TFT contributes to World GBC sustainable renovation report
The World Green Building Council (GBC) recognises the role of renovating building stock to boost economic recovery across Europe following the COVID-19 pandemic and its wider effects. To that end, the World GBC has issued guidance and case studies on leading sustainable building renovation programmes. Published under the EU-funded BUILD UPON2 project, the Starting a Renovation Wave Report (download link) is now available.
The report summarises the World GBC’s recommended approach to sustainable renovations:
Starting local with best practice case studies of sustainable building renovations.
Use leaders and regulators, including mandatory energy performance requirements to drive building standards such as the UK’s Minimum Energy Efficiency Standards (MEES).
Systemic impact tracking to enable cities and local authorities to understand the outcomes of their initiatives.
Convene diverse stakeholders across the building and construction value chain to solve sustainable renovation barriers together.
In terms of regulation, the UK’s MEES certification is a unique proposition in global real estate, because it imposes a minimum standard for a building to achieve before it is let or sold.
TFT is often brought in to advise investors and building owners on their buildings’ operational energy use, with a view to MEES and its impact on property or portfolio’s commercial prospects. No other country has a requirement as consequential as this in the market and, looking ahead, it’s possible the UK government will go on to introduce higher standards still.
Partner and Head of Sustainability Mat Lown contributed to the report’s deep dive on MEES in the UK, explaining how our clients are responding to the regulations and expect it to tighten in the near future.
“Of the several thousand properties and transactions that we’ve been involved in, we’ve only lodged two exemptions, which is because either we were able to improve the rating by accurately modelling the property and/or by our clients carrying out cost-effective improvements to secure a compliant rating. However, with the continue to let provisions kicking in for non-domestic property in 2023 and if the minimum standard tightens to a B in 2030, then I expect it will become more challenging to meet the standard and therefore, expect there to be an increase in the number of exemptions.
The future trajectory of MEES is very much on our clients’ radar with the acceptance that the minimum standard is likely to move to a B within the next 10 years.”
Mat Lown, TFT Partner and Head of Sustainability
How can construction projects achieve circular economy ambitions?
One of the greatest opportunities about the circular economy is also its greatest challenge: success will deliver, and relies on, systemic change. In the context of sustainable construction that means investors, contractors, consultants and construction supply chains must work together and follow the same strategies to do things differently.
The UK Green Building Council (UKGBC) highlighted that, of 50,000 buildings demolished every year, much of the 90% of waste which is recovered is then recycled into less valuable products or materials, as opposed to being reused. This leaves a huge environmental and financial opportunity for our industry to resolve.
The circular economy brings clear benefits to construction, including:
Reduced embodied carbon
Reduced landfill costs
Help to secure planning permission more easily
Reduced depletion of natural resources
TFT has supported UKGBC Circular Economy guidance from its conception in 2018. We do so because we believe it is becoming the most important tool for our industry to act on replacing material waste and carbon emissions with circular principles through our day-to-day work.
The latest stage of its guidance focusses on three changes of mindset and practice. Together, they will drive us closer to a circular process which results in a better environmental impact and lower project costs too.
1. Use the circular economy to inform building design (not the other way around)
Some investors and developers – those initiating the build or works in question – are more aware of circular economy principles than others, but invariably the steps they take to achieve them must come sooner.
Material inventories and assessment tends to be part of the design process, which results in a diminished scope for designing a building for circularity, so the advantages of the process are already proportionally reduced. These steps need to begin as early as RIBA Stage 0-1.
Our circular economy consultancy typically kicks in before this stage. At this point, we can advise on setting ambitions for the work then organising and communicating the process so that design teams can understand what existing materials we are working with, and coming up with the best design to suit their re-use.
2. Procure products as a service (PaaS) to improve installation, maintenance and replacement
As well as reuse, the UKGBC has released guidance on embracing products as a service (PaaS). The principle is to create a feedback loop which engages suppliers of building products such as lighting fixtures, steel tubing or flooring on a contract basis. This way, products are installed, maintained and decommissioned for refurbishment by the supplier, as opposed to being bought, used and discarded or recycled by different parties through the building or product lifecycle.
UKGBC describes lighting as a service (LaaS) to illustrate and encourage the demand for servicing over purchasing. The model results in greater efficiencies, longer product lifetime and specialist refurbishment and reuse or, as a last resort, recycling.
This How-to Guide takes project teams which are working on projects that are replacing lighting, through the process and project teams’ roles and responsibilities for applying LaaS. This guide provides an understanding of what information is required, who to involve and at which point in the programme.
A huge advantage we see for this approach is in re-evaluating the way maintenance contracts are procured. A closed loop approach owned by the manufacturer lends itself to better-performing fittings and a fully accountable maintenance regime by the product experts.
Furthermore PaaS can help support dilapidations-free leases and more flexible models of tenancy. If components are created and installed with ease of removal, dismantling and re-use in mind, that could be one less hurdle for tenants and landlords to negotiate at the end of a lease.
3. Share circular economy responsibility across the whole design and construction team
Though the impetus will come from the client at the outset of a project, responsibility for meeting a circular ambition rests with the client’s entire delivery team. Over the course of the works, everyone from procurement, project management, main contractor, demolition contractor, design team, facilities management and inventory auditor will play a vital role and have responsibilities in progressing circular outcomes.
In our Development and Project Consultancy roles, TFT helps to orient project teams toward greater material reuse and waste reduction, using resources such as the UKGBC guidance. Doing so effectively means early involvement, as we suggest in point 1!
Further reading: UKGBC innovation insights
You can find out more about the UKGBC’s Circular Economy work, including the above points, here. In our support of the programme we have also been involved with two further pieces of guidance relating to how apply circular principles to construction works.
Sustainable building services: 3 steps for building owners and managers
This post is adapted from an article writtenby Mat Lown, TFT Partner and Head of Sustainability, for the CIBSE blog. Mat spoke at CIBSE’s Build2Perform event about how building surveyors and engineers could deliver sustainable and resilient buildings by working with landlords and tenants to adopt a customer experience focus.
Sustainable building is often understood in material terms – from use in construction to energy efficiency in operation. But better management of building services can contribute significantly to a building’s resilience to future climate change as well as evolving requirements of occupiers.
How can building owners create more resilient assets?
There are three ways that property managers and facilities managers can overcome unsustainable practices. Standard practice currently splits responsibility and organises maintenance in silos, resulting in a disconnection between the work of surveyors, engineers, facility and property managers. Each of these points helps to overcome this barrier to building resilience and sustainable performance.
1. Use contracts and procurement to set sustainable building priorities
As with many procedures in the building industry, contract content, structure and mobilisation is critical. Current procurement practices tend to favour the lowest bidder that often under-prices the maintenance element, while maintenance contracts and contractor performance is monitored against statutory compliance alone.
This is a short-term approach for a building which could be in use for decades, subject to a great deal of change in that period. It also does not reflect increasing market demands in relation to building performance, sustainability and user experience.
Instead, a closer and more consultative relationship with contractors can result in a better long-term strategy and delivery of more sustainable and economical outcomes. To make this work, the building owner must be clear about specifying the right maintenance and performance measures at the outset, while also engaging with the contractors’ own expertise early on to assess overall viability.
By better understanding the condition of building plant and equipment, one can determine what repairs and maintenance are required to ensure optimal performance and a long service life. Then independent verification can ensure that maintenance is undertaken and that occupiers feel they are receiving value for money.
Understanding of system design and settings is essential to ensure that the building is operating as designed thanks to its maintenance regime.
2. Combine surveying and engineering skills for sustainable building maintenance
Surveying and engineering roles don’t always overlap, but they should work in tandem. Join up the process to mitigate wastage of equipment and time for access, and to anticipate potential problems and save money on future repair or replacement works.
For instance, if an engineer is commissioned to replace equipment on the roof, allow a surveyor to access and inspect the entire roof area and recommend simultaneous works or identify developing issues.
Even if there are no additional works resulting, surveyors and engineers can be useful consultants for a building manager. While their language and viewpoints are different, surveyors’ understanding of service charges, leases and landlord obligations can put the engineers’ deep technical expertise into context and help owners prioritise and plan for more effective maintenance.
3. Maintain sustainable building services for user experience and occupier needs
Prospective occupants now view building performance not simply in terms of energy badges and due diligence reports. Instead, they consider how spaces will function for the comfort and performance of their users, the people within it. That functionality might change as occupiers spend time in a space and adapt it to their needs, so the role of maintenance becomes crucial to adapt and optimise performance of services rather than only to keep them functioning.
That requires regular and quality dialogue between those using the building and those maintaining and managing it. Surveys and measurement tools can provide metrics, while qualitative feedback by occupiers’ employees for instance can contextualise the experiences of individuals against what they use the space for, and how that might change.
Reliance on EPC metrics will hold back better buildings
As The Times described, there is a ‘CO2 challenge that towers over tall buildings’. But, rating the London skyline on their energy performance certificates (EPCs) figures isn’t always the best way to determine the scale of that challenge.
While I can’t fault the aims of the piece to draw attention to a major concern, the EPC is problematic. It’s a widely recognised marker of a building’s energy efficiency, but that doesn’t mean it is a reliable standard. The EPC-based CO2 emissions of the buildings listed in the article could be far greater or lower in reality. In fact, the highest-rated buildings (EPC A+) do not necessarily produce zero carbon in operation.
TFT has examined over 1,000 EPCs in London alone, which have shown the shortcomings of focusing on their ratings in isolation. We found that EPC performance predictions often overlook significant variables, instead making assumptions to ‘standardise’ ratings across different buildings. The result is that EPC certification won’t accurately consider the impact of: actual occupational densities, usage profiles and additional services such as lifts, external lighting and other equipment which isn’t included in its predictions.
EPCs may appear to be a go-to sustainability credential, but these shortcomings mean that EPC adherence must sit alongside a more viable strategy for performance measurement. We believe a more robust approach to sustainability is to assess how buildings perform in use, not just how their designs stack up.
The good news is that more advanced modelling approaches are in use, which will predict a building’s operational performance during design, construction and occupation. Emerging initiatives such as Design for Performance developed by the Better Buildings Partnership (BBP) and based on Australian NABERS experience allow owners and occupiers to understand the reality of how the building will use energy on a day-to-day basis in operation.
It means we can more accurately measure and optimise buildings for an occupier’s needs and regulatory demands, minimising energy use and boosting performance.
The EPC will continue to be a regulatory sticking point which owners will need to overcome when selling or letting. But we must also employ realistic and practical measurement to prevent red herring regulation from holding back progress towards a more sustainable built environment.