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The Savills Blog

Retrofit and retain: how the rapid growth of ESG is changing property management

With the landscape of the property industry changing as a result of the pandemic, a greater focus on ESG and wellness goals pushing further up the agenda following COP26, what does this mean for property managers and how do we keep ahead of the curve of occupier demands?

For offices in particular, there has been a fundamental shift in working patterns and the way buildings are occupied, which has in turn resulted in a change in the way the management of the property is approached. Hybrid working, the war for talent and increased facilities and amenities, including showers and cycle storage, are all factors that are now considered in the overall management of a property. However, what is perhaps the biggest element for consideration is sustainability and the race to become net zero.

Achieving BREEAM excellence, increasing the energy performance of a building (EPC scoring), targeting 5* NABERS ratings or completing the reset air quality assessment all play a role in creating a sustainable building. Yet they come with a significant upfront cost and as we all learn to adapt to meet new ESG requirements the question remains, who pays – landlord or tenant?

As ESG goals and targets become ever more ingrained in the offices we occupy, it is important for occupiers and managers alike to set out realistic targets. Properties can be retrofitted to reduce overall environmental impact, but the challenge around this comes back to cost – balancing keeping service rates down while improving energy efficiency.

While the property managers can introduce new designs and net zero pathways to refurbish an existing building, ultimately the occupier is responsible for the operational performance. The energy use of a building is dependent on each asset’s unique features. The communal areas managed by the landlord, including lighting and heating has significantly lower energy use compared to consumption across large footplates.

We need to work together to maximise these ESG credentials in a joined-up approach that focuses on sharing data and creating green leases and clauses that supports both the owners and occupiers. This will in turn create greater transparency, setting out commitments to act together that suits both the developer and occupier to create a more sustainable building and ensuring ESG targets are met.   

While these implementations can take time, adapting to these changes will be a positive step towards today’s demands.

 

Further information


The role of construction materials in the move to net zero

 

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