Commercial office space in London certified as sustainable is going for over 20 per cent more in sale value and 11 per cent higher rent than other offices, according to property broker Jones Lang LaSalle. And now NABERS has hit the UK, the hope is it will help in the fight for net zero.
What is BREEAM?
The certification in question is BREEAM, which stands for Building Research Establishment Energy Assessment Method. It is the most popular voluntary assessment method in the UK that is used to describe both new and existing buildings’ environmental performance.
Buildings are scored outstanding, excellent, very good, good, pass or unclassified based on their performance against a series of set criteria, with assessments conducted in two stages – a design assessment followed by a post-construction assessment.
It began in the 1990s and now covers nine categories from energy to health and well-being. Energy accounts for 19 per cent of the scoring system.
The green premium
“Buildings with a BREEAM certification were on average 20.6 per cent higher than those without that accreditation, and rents were on average 11.6 per cent higher,” according to Mr Manley, who is the chief sustainability officer at CPP Investments.
This agrees with research undertaken by Knight Frank (in September 2021), which showed that the average impact of BREEAM certifications impacted office rental value. Julian Sandbach, head of Central London office markets at JLL, observed: “This research endorses what we have been witnessing in occupational and investment markets within Central London for some time, namely buildings with strong sustainability credentials will lease for premium rents and sell for premium yields.
The research shows that the market is increasingly attaching higher prices to more sustainable assets, in anticipation of higher returns and lower risks. The data also shows that this is resulting in improvements being made to the environmental performance of London’s office stock.
The green premium is the direct product of corporate efforts to cut emissions, Mr Manley said. London is dominated by companies in services industries such as banking, asset management and law firms – and many of these firms have made public commitments to reduce their carbon emissions.
“The easiest lever to play with today is a green building,” he said. The result is “we’re seeing a structural shift in demand” for environmentally friendly properties.
There are about 3000 office buildings in London, according to Knight Frank. Mr Manley warned that soon the market will start to punish those with the worst environmental credentials.
“I don’t think the market has fully quantified and reflected in valuation the contingent liability associated with decarbonisation,” he said. “We need to develop a greater appreciation of the actual cost of decarbonisation and see how that translates into valuation.”
He believes that these trends will play out in most other industries; it is about how businesses and business models will need to adapt for a carbon-constrained world.
This could happen quite quickly as investors realise the cost liability of decarbonisation, he says, adding that it is promising that it is happening first in buildings since they are responsible for 40 per cent of total greenhouse gas emissions.
Updating BREEAAM to include lifetime carbon emissions
Building Research Establishment (BRE) is presently updating BREEAM. BREEAM V7 will reflect the most current science and sync with ENERGY STAR ratings, to allow for the exchange of data and improve compatibility with the most up-to-date global ESG requirements. The revised version will also mark the first update spanning BREEAM’s New Construction, Refurbishment and Fit Out, and In-Use standards.
Building owners can now use certifications like BREEAM to respond to tenants’ increasing desire for greater sustainability as well as reducing their operating costs.
The latest version of BREEAM will strengthen the role of embodied carbon and whole life carbon in its sustainability performance assessments.
While embodied carbon has been part of BREEAM for more than a decade, it has become increasingly more important in recent years, being given more credits, a higher weighting and a more sophisticated methodology.
BRE said one of the aims of version seven is to continue this trend and start bringing operational and embodied carbon together to produce a measure of whole life carbon.
BRE chief executive Gillian Charlesworth said: “By looking at Energy and Carbon science across the board, BRE continues to provide the leading assessment and certification method for the built environment, helping owners and occupiers around the world to address the most pressing sustainability challenges in a holistic way.
“We want to ensure that BREEAM reflects the latest developments in net zero science and regulation.”
Enter NABERS UK
BRE has technical responsibility for NABERS UK, which is managed in the UK by Better Building Partnership. Launched in 2022 as a carbon copy of the Australian version, it will no doubt continue to evolve and adapt to the British environment.
According to Sarah Ratcliffe, the CEO of BPP, it is experiencing exponential growth, although it is still early days. In a recent business briefing she said greenhouse gas emissions from commercial buildings in the UK generally have flatlined since 2014.
She went on to say that the purpose of NABERS is to “bridge the performance gap” which is the gap between the amount of energy the building was designed to use and that actually used by the occupants, which is usually greater. It does this, she said, by measuring actual performance and stimulating occupants to do better.
If the Australian experience is anything to go by then this continual improvement will be replicated throughout neighbourhoods as the scheme gains popularity.
Eventually, the theory has it, no property will be left behind, because to be left behind will mean to lose value.