roundtable 29


Hiatt: “Will refurbishment become the new development? Will we see less knocking down and an increase in making something of the existing structure? Previously, occupiers have moved out while things were upgraded, then moved back in again, but that may not be possible. How do you keep a business going when you are having half of it refurbished? There will need to be more landlord-occupier partnership discussions for sure.”


In re-leasing negotiations, more and more tenants were asking landlords if they could improve the energy efficiency of a building, Richmond added.


Fit-out costs would also have to be addressed said Peacock. Normally they would be amortised over the course of a long lease, but with five-year leases more in favour such costs would not be covered so simply. Another problem is that we are designing buildings that are too rigid, not modular enough and can’t be adapted easily.”


Dean: “We have buildings in our portfolio that we are choosing to refurbish rather than demolish and put up new buildings. That’s primarily because the fundamentals of these 20-25 year-old buildings are what architects, under the new building regulations, are now being asked to design. It’s almost come full circle; their design is back in fashion.”


Bates mentioned market viability: “If you end up with buildings where the ratio of lettable space to non-lettable space changes, then it is simply a matter of economics, that unless the costs come down, then rents will have to go up. Viability and sustainability have been the two big factors in play for institutional investors and developers over the past decade and I’m sure they will remain so for the next decade. That’s why debt and investors appetite for speculative development has wained in the market today.”


Hiatt said saleability had to be carefully considered: “Have we got to the point where people are saying, ‘Actually £22-£25 per sq ft is all we are going to pay’?


John Alker


The difference between a building’s potential and actual performance was often misunderstood, said Peacock. Occupiers needed to be educated in the use of ‘green’ buildings.


Monitoring and measuring building- performance was still a challenge. PwC’s More London building was an example that ably proved its ‘green’ rating, but too many probably did not.


Durbin suggested “the people who know the building best (developers, designers, M&E contractors) should get together and continue the journey of managing its performance.”


An MOT for buildings?


Hiatt: “There is a need for an appropriate rating system because the ones we have now don’t really do the job. The annual review Green Flag system used in Australia would be far better. It would promote the introduction of ‘green leases” which put an onus on both landlords and occupiers to retain the rating.”


Yvette Hanson


Who’s going to pay to go green?


Murray queried whether occupiers were actually prepared to pay more for environmentally friendly green buildings.


THE BUSINESS MAGAZINE – THAMES VALLEY – SEPTEMBER 2012


Alker: “We simply don’t know how most commercial buildings are performing – there is a huge information deficit. When you buy a car, you know what its fuel consumption is going to be, and you get a yearly MOT to make sure it’s roadworthy – what’s the equivalent for buildings? The proposed Energy Efficiency Directive could require energy audits and give the Government an opportunity to extend Display Energy Certificates to all buildings, he suggested.


Better awareness of such buildings performance would help occupiers make that decision, Alker suggested: “I’m always very careful not to overstate the case for a ‘green premium’, it’s probably more sensible to talk about a ‘brown discount’. But undoubtedly the legislation that will potentially make it illegal to let F and G rated buildings (by Energy Performance Certificate) from 2018 is going to focus minds. However, the Government needs to get its act together and clarify how this legislation will work in practice. I think it could be incredibly significant, but fear it could be full of loopholes.”


Blanchard thought that, like financial tax loop holes, people would look for ways to ‘green- wash’ buildings to avoid the implications of such legislation.


Richmond admitted that sustainability is very much part of PwC business philosophy and as sole occupiers, ‘green’ gains were tangible – tri-generation had contributed 47% against a predicted 25% – but it would be far more difficult to establish and control performance in a multi-occupancy building.


Chris Hiatt


Peacock noted that many businesses were still not engaged in the ‘green’ journey. “BREEAM started to raise awareness of building standards, but most people don’t realise that building regulations have been ratcheted upwards hugely and go up again next year, so you can’t actually build something that’s not BREEAM good nowadays. EPCs are potentially a stick coming in to push people into recognition of building performance ratings.”


Dean: “EPCs and BREEAM are what occupiers focus on, but from the developers’ point of view it is meeting the new building regulations regime that is driving costs. That’s why we are currently seeing rents of £30 per sq ft, because you can’t afford to build them for anything less than that.”


Does BREEAM promote a true ‘green dream’?


Hanson: For me the BREEAM assessment to date hasn’t really reflected what makes a truly green building as significant points are awarded for things you have no control over, such as location. BREEAM has been promoted as the green indicator so consequently it is what occupiers have focused on rather than the building’s energy performance or its true sustainable criteria however, it’s good to see that the 2011 revisions are going some way to bridging his gap.


Peacock: “All I am hearing from occupiers is energy efficiency, not sustainability.”


Dean: “If occupiers talk to us about pre-lets, then sustainability, BREEAM, EPCs are very much in the conversation, but with standing stock I have never had anybody say they’re not taking the space because it does not meet a specific rating. There’s an acceptance that the ratings are there, but no challenge or interest to demand them.”


www.businessmag.co.uk Continued overleaf ...


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