Building a sustainable environment is no easy task. Tackling the contradictory pressures of cooling, heating and powering the workplace while reducing energy consumption has always been an uphill challenge. The increased demands of delivering on environmental, social and governance targets – and capturing some of 2020’s $51.1 billion of new money invested into ESG-focused funds, per Morningstar data – has simply added to the pressure. Add in the challenge of keeping staff healthy and happy post-covid and the ESG target gets harder still.
It is a challenge the industry is stepping up to, according to Alex Edds, director of innovation at JLL. “In the past 18 months there has been a genuine desire to do things differently; board-level members have been asking, ‘How do I do this?’ even if they know it might hurt ROI,” he says.
And that desire is being matched by money. In a survey conducted by the UK Green Building Council in April & May 2021, 77 percent of developers who responded have applied or are applying guidance on renewable energy and carbon offsetting to their developments.
The ambition is there to do more, however, and this is where proptech has stepped in. “Technology can be an enabler for ambitions around sustainability, for example decarbonisation and getting to net-zero,” says Ruben Langbroek, head of Asia-Pacific at GRESB.
Where once there were polite notices and Excel sheets, proptech has delivered improved metering, sensors and, most importantly, centralised building management systems to help deliver ESG targets. Where the built environment is behind the curve is the delivery of net-zero carbon emissions buildings.
Finding the right mix
The main problem has been the large carbon footprint of the concrete and steel industries. Concrete manufacturing alone is estimated to cause 6 percent of all global CO2 emissions.
“The single most important thing in the construction industry right now is embodied carbon,” says Langbroek, and developers are in a rush to find the solution to this problem.
Around $100 million of investment was put into the concrete industry in 2020-21 to explore less harmful concrete production methods such as exploiting cleaner energy and using different materials.
“Board-level members have been asking, ‘How do I do this?’ even if they know it might hurt ROI”
Proptech is delivering alternatives to more traditional methods through improved design and materials, but the need for specialist construction methods and higher material costs are a bar to delivering a net-zero building for some investors. Costs are certainly higher than in traditional construction, but Langbroek believes this concern is overblown. “There’s a misconception that the costs will not be attractive enough to make that effort to build sustainably, but with minimal upfront expenditures you can create value over a longer period,” he says.
As an example, JLL estimates in a report on the impact of sustainability on value that Lendlease’s 2 Redman Place in London will cost £1 ($1.4; €1.2) per square foot more than a more traditional construction but attract a 10 percent rental premium if it reaches an A rating in the EPC energy performance standard. Modern materials are also being produced at ever-reducing cost, says Edds, which will make buildings rated more highly by the likes of BREEAM or GRESB even more profitable.
The last couple of years have highlighted the social factor in the built environment. “There’s been an increasing conversation around cleanliness and wellbeing and the customer experience; helping get people back into the building,” says Edds. Tenants, who have long been a driving force a for a greener environment, now also expect a healthier one if they are to return to working at the office, for example.
Francesca Brady, CEO of advisory and assessor AirRated, believes a healthy workspace has come to be highly prized. “As a landlord it is almost seen as a value-add, reducing void periods and accelerating leasing campaigns,” she says. Good air quality has become a unique selling point in some cases.
“Technology can be an enabler for ambitions around sustainability”
Susana Quintas, a senior adviser at Metrikus, says this has been enabled by the increased use of tech such as motion sensors to monitor building use and airflow and HEPA filters to clean incoming air into closed buildings. This has been the case both throughout new builds and via the integration of these measures into the building management systems of existing builds.
The data produced by the management systems can even be passed on in real time to cleaners and maintenance teams to help cut waste and the use of chemicals in the everyday running of the building.
However, there is a clash between making an energy efficient building that is also well ventilated and clean. “Proptech should help us do these two things in tandem,” says Brady. “With air quality and occupancy being monitored around the building we should be able to apply controls to the buildings systems, redirecting airflow where needed efficiently.”
Whatever the monitor or management system adopted to create a healthy and sustainable workplace, technology is not a panacea. “Tech is not the solution on its own; it is the enabler of that solution,” notes Edds. The use of the data it provides is the key to good governance and management of the portfolio to create better ESG outcomes.
Relatively cheap plug-in build management systems are also revolutionising the data delivered out of older buildings, helping deliver efficiencies unimaginable even just 10 years ago. Processing all that data to make effective decisions across the portfolio is still in its infancy, though, and with it come some of the usual start-up issues such as consistent data and ways to look at it.
“There is still a long way to go to get uniformity in the way this data is collected,” warns Edds, but he believes steps are being made to make the data more consistent. That is where the growth of agencies such as GRESB, BREEAM and WELL is providing welcome reassurance for investors that the real estate industry is performing across the ESG scale as well as it believes.
Proptech is bringing change to the way real estate governs itself, providing a healthy working environment for tenants and delivering sustainable benefits that could reduce the pace of global climate change. Companies like Metrikus, Measurabl and AirRated are working to fulfill genuine board-level ambitions to improve the ESG profile of real estate in a meaningful way.
The use of this technology is still relatively new, however, and there is more to come, especially in the drive for net-zero carbon buildings. The incentive to get there is clear, not just for the planet and workers, but also for investors.
There is no shortage of demand for more sustainable healthy buildings. JLL estimates that 126 companies signed up by 2018 to being carbon neutral will need around 12 million square feet by 2030 to meet their targets. With no net-zero building currently available the race is already on to be the real estate investor who can deliver on their ESG ambitions.
A number of organisations exist to quantify buildings’ ESG credentials and make comparisons more objective
AirRated: AirRated provides certification for indoor air quality measured against leading medical research and current best practice.
BREEAM: The Building Research Establishment Environmental Assessment Method is an internationally recognised measure of a building’s sustainability, delivering an assessment of an asset’s environmental, social and economic sustainability across the building’s lifespan.
GRESB: Formerly the Global Real Estate Sustainability Benchmark, GRESB is a global ESG advisory and assessment body for the built environment. The group works with investors to assess and compare projects using a common benchmark.
WELL Building Standard: The International WELL Building Institute’s building standard and roadmap to creating a healthy workspace through better operational and design methods focuses on how buildings, and everything in them, can enhance health and wellness.