Pathways to Property:

Starting Your Career in Real Estate

Sustainability value in
property
Audio transcript

Hi, my name is Jorn Van de Wetering and I work in Real Estate and Planning in the
Henley Business School. One of the things I do, is I teach a course on sustainability. So
what I‘m going to do in this podcast, I’m going to talk about sustainability as it affects
property. And the way to start doing that is to come up with some sort of definition; a
consensus as to what we think sustainability is in property. So we can define
sustainability as seeking alignment between environmental, social and economic
concerns. Solutions that address all three dimensions in a balanced way can be called
sustainable.
In its most basic form, it’s about reconciling an economic system that is in its current form
designed to cater for infinite needs with the reality that the resources on which we
depend are, either in the short term or long term, finite.
Environmental issues have received a lot of airtime over the last few decades as we are
increasingly confronted with some of the planet’s constraints and are seeking ways
forward to make our lifestyles more sustainable.
Many companies have reacted to these concerns and adopted measures to address
what we call Environmental Social Governance (or ESG) issues in their practice. This
includes addressing sustainability in the buildings that they occupy.

Sustainable building and green building attributes

So now I’m going to talk a little about sustainable building and green building attributes.
Now, the general aim of sustainable buildings is to incorporate some of that definition of
sustainability. And to achieve more environmental efficiency and reduce harmful,
negative environmental impacts, as well as make buildings more user-friendly and
generally more pleasant environments for people to work and live in.
Sustainability attributes- the features of buildings that are sustainable - typically address
environmental themes like the following:
• Energy
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Pathways to Property:
Starting Your Career in Real Estate

• Water
• Waste
• Materials
• Pollution
• Transport
• Land Use and Ecology
They can also address more social features rather than environmental features, and they
can include Indoor Health & Wellbeing: how are the acoustics?, indoor pollution, is the
temperature in order? Are they friendly for users?
But having these features in buildings is one thing, we also need to think about how we
manage these buildings over time. We call this sustainability management or
governance.

Sustainability assessment
So now I’m going to talk a little bit about how these things are assessed. On a very high
level, much of the international, national, regional and local government effort is focused
on achieving energy efficiency. This can be attributed to issues such as climate change
and the need to obtain energy security. In other words, it’s about reducing carbon
emissions, as well as making sure that we can cater for the energy needs, the clean
energy needs, of current generations without compromising (clean) energy availability for
future generations.
The UK government has included energy efficiency measures in legislation and has also
introduced a number of initiatives to promote energy efficiency. Of particular interest in
this case, are two energy certification methods that reveal energy efficiency in buildings.
• The first one is the Energy Performance Certificate, which measures and reveals,
on a scale of A (meaning the building area that is assessed is very energy
efficient) to G (meaning it’s very energy inefficient), the certificate reveals the
energy efficiency of buildings when they are constructed, sold or let based on
modelled energy features. And it can be used by property market participants to
make more informed decisions about the energy efficiency of buildings that they
own, or occupy, or are interested in. And this is the standard that’s going to
become more important in the future as it sets minimum energy requirements for
buildings in the private rented sector going forward.
• The second one is the Display Energy Certificate, which measures and reveals
the energy efficiency of buildings occupied by a subset of public sector occupiers
to building users based on operational energy consumption data. So whereat the
EPC is based on model data, this is based on actual data rather than building
features used in the EPC. The rating scale of this label looks similar to that of an
EPC. So it goes from A to G, with A being efficient and G being energy inefficient.

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Pathways to Property:
Starting Your Career in Real Estate

In addition to these compulsory tools, meaning you have to have them, the market has
also introduced voluntary tools to measure sustainability in buildings. The most well-
known one in the UK is BREEAM, or the Building Research Establishment
Environmental Assessment Method.
BREEAM is an environmental assessment method that combines and measures a wider
set of sustainability features of buildings, including some of the ones I mentioned earlier,
during its design and construction in what we call a balanced scorecard (a strategic
performance management tool).So it does not just look at energy but also building
features such as water, waste and indoor health and wellbeing
Performance of buildings is then assessed using a checklist which contains minimum
requirements and expresses performance on a scale that ranges from ‘Pass’ to
‘Outstanding’. So if ‘Pass’ means that you have addressed the more basic sustainability
requirements, ‘Outstanding’ means that you have gone beyond what is considered to be
good practice building and the building is an exemplar of best practice. And then there
are also categories in between those two.
For homeowners there is the Home Quality Mark, which looks at building sustainability
features, as well as how you use and manage your building.

Sustainability value
So now I’m going to say a few things about sustainability value. So why is this such a hot
topic?
Well, an important part of this is that there is a real tangible business case for green
buildings. Studies have indicated that there can be premiums in the rents that tenants or
occupiers pay to rent green buildings so they can occupy them and the sale prices that
owners or ‘investors’ of properties will pay to buy them. ‘Green’ in this case is normally
measured using methods such as BREEAM or its American equivalent LEED.
In addition to these higher values, investors may see higher levels of interest in these
buildings and a higher uptake of them as a result. In fact, many of the most prominent
and visible buildings across the world now have high environmental certification levels
almost by default.
Other benefits have included lower operating costs (meaning that if you use less energy
and water and generate less waste your bills will be lower).
But there may also be benefits that can be more difficult to quantify. For example, if you
improve the indoor health and well-being features of a building (meaning better air
quality, improved lighting, heating and a more well-conceived working environment
overall), your staff will be happier and more productive, which is positive for your
organisation.
Owning or occupying buildings with superior environmental certification can also be a
way of showing to your customers, your shareholders and to other stakeholders that you

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Pathways to Property:
Starting Your Career in Real Estate

are thinking about sustainability and addressing it, which can help improve your image.
And for investors we call this ‘future-proofing’.
If you’re a homeowner, it can mean your house is of superior design, pleasant to live in, it
will help you save on your bills and it can give you a certain feel-good factor overall.
So to summarise, generally, the certification can be a mark of high quality that property
markets can look for when they want to avoid the negative effects of poor environmental
practice.

Going forwards
So, going forwards, looking towards the future, we can see that there is an increased
focus on measuring the environmental and social performance of buildings beyond the
design and construction phases.
This means looking at the operational or the ‘in-use’ part of building lifecycles, meaning
that we are interested in finding out how buildings are operated by their users and how
we can make improvements at this stage. There has also been a marked shift towards
health and well-being issues as companies are seeking to find new ways to attract and
retain talent. And finally, once buildings come to the end of their lifespan we can think
about ways to reuse them, retrofit them or redevelop them.
One of the aims of sustainability is to close the lifecycle circle, meaning that rather than
disposing of buildings we try to find ways to keep reusing them, to save energy and
materials and reduce or, ideally, remove waste generation. This can also be applied to
the regeneration of entire areas, where we try to protect and preserve existing buildings,
infrastructure and other area features and try to give them a new use. This has already
been successfully done in places such as Berlin, Amsterdam and Freiburg and there are
a lot of other interesting cases out there.
So in other words, there are plenty of opportunities out there for young property
professionals to create value by thinking about new ways to improve the sustainability
performance of buildings. So I would encourage you to find them.

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