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The sustainability equation: finding the gold in green buildings

Sustainability has been firmly on the agenda for some time now and yet the transition towards sustainable development has been slow. Sustainability is often seen as being about “green buildings”, with a focus on managing environmental impacts, waste and energy cost savings. However, sustainable development is also about recognising that buildings are part of the fabric of society. They have an impact, whether good or bad, on the communities in which they are located and they have an impact on the well-being of those who live and work in them.

BLP recently published a report drawing on research commissioned to identify the dynamics involved in the issue of sustainability facing the real estate and construction industries. The research was conducted with senior management at a number of leading organisations with a substantial real estate footprint in the UK, but not aimed at the principals in charge of sustainability.

Is sustainability sustainable?

The report considered a key question: is sustainability sustainable? This, in turn, gave rise to further questions: what needs to happen to accelerate sustainable building practices, good design, construction and building management? Outside of “green” issues, how powerful is the economic argument for sustainability and its effect on the bottom line? What’s in it for the investor, the developer, the landlord and the tenant? Ultimately, where will the drive for increased sustainability come from?

It reached the following conclusions:

  • Sustainability is not yet core to the real estate business due to the uncertainty of financial returns. Although some developers, occupiers and investors are focusing seriously on the issue there is still a degree of cynicism over “green agenda”. The effect of the recession on sustainability is difficult to gauge, but the issue continues to become more important to the industry and will become a fundamental driver in the future.
  • A key issue is how to reshape existing stock. Based on current statistics, the scale of this particular problem is vast and improving existing stock is critical if government carbon reduction targets are to be met. However the current lack of legislation affecting existing stock means that sustainability in this area will “always be optional”.
  • Legislation is seen as the key driver behind sustainable development, but the current abundance of regulation is largely regarded as ineffective. New regulation should be led by government but developed in close consultation with architects, property owners and occupiers to help ensure that it is workable, creative and innovative.
  • The strongest business case for sustainable development is that it makes economic sense for all those involved in the real estate life cycle. However, this is not yet fully realised by many in the sector. Return on investment will always be the key factor, but there are other financial benefits. For example, there is a growing realisation among tenants that a well designed sustainable building can also deliver economic benefits in terms of occupant/staff health and productivity.
  • This demand from the market will play a key role in pushing sustainability forward. Tenants and corporate occupiers were ranked second only to national government as the main influencers of sustainability. Brand risk management and supply chain demands were ranked as the second and third most important drivers respectively.

Overall conclusion

Sustainability is sustainable, but unlikely to be achieved quickly through self-regulation. Sustainable development is steadily rising to the top of the agenda, both politically and commercially, and there are some critical drivers for change.

Brand risk management will act as a powerful force towards increasing sustainable development as investors, developers, landlords and corporate tenants demand reduced energy and maintenance costs and satisfy their own environmental policies. However, the main driver for sustainable development will be compulsory measures via legislative change. Government, therefore, has a significant role to play in encouraging sustainable development in the future.

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