GLOBAL PROPERTY INSIGHT FINANCIAL TIMES SPECIAL REPORT | Tuesday April 17 2012 www.ft.com/property-april2012 | twitter.com/ftreports Investors drive sustainability Ed Hammond notes uncertainty about when, or even whether, green technologies will pay back the money invested in them hen the roof fell in on the international property industry in 2008, it would have Wbeen easy to suppose that envi- ronmental concerns would be put on the back burner. In reality, the relationship between the built environment and sustainability has flourished during the past four years. From landlords attempting to make their buildings as energy efficient as possible, to developers sourcing the most sustainable construction materials and fund managers retrofitting billions of dollars worth of buildings to attract an increasingly environ- mentally conscious investor base, sustainability is now an impor- tant concept in the property industry. And all this in spite of a down- turn that has crippled confidence and activity levels on both sides of the Atlantic. Legislators in Europe, the US developers or owners, is weighing whether this will happen at all. for many organisations, as they Analysts say that before the and Asia are already putting pres- up the benefits of fitting out Moreover, companies facing struggle to cut costs, maintain financial crisis, sustainability sure on owners to improve the buildings to be as environmen- spending cuts may see “green” operations and secure funding for often consisted only of token ges- environmental standards of their tally efficient as possible, against investment as a luxury and focus investment,” says Paul Brown, tures by property companies. buildings and this is expected to the capital needed to do it. instead on spending in areas that head of sustainability at DTZ, the While much is made of high-pro- grow. As sustainability is still a rela- will contribute to survival and property services group. file buildings now being built to Specialist consultancies and tively recent aspect to the indus- growth. For the managers of larger prop- the toughest environmental stand- boutique investment funds have try, there is a lot of uncertainty “In [this] economic climate, it is erty funds, however, the choice is ards, the real challenge for the sprung up to meet the retrofitting about how long it will take for probably fair to state that the being made for them by investors industry is to make existing stock needs. However, the difficulty for green technologies to “pay back” focus on improving sustainability more efficient. many smaller companies, whether the investment in them, or has fallen down the priority list Continued on Page 3 2 FINANCIAL TIMES TUESDAY APRIL 17 2012 FINANCIAL TIMES TUESDAY APRIL 17 2012 3 Global Property Insight Global Property Insight In This Issue Recycling just another Investors drive industry focus on sustainability Continued from Page 1 that the UK government has not methods to energy-saving retrofit- friendliness in exchange for low yet done enough to put coherent ting, becomes more widespread construction costs, now expect who want to know how their and workable environmental and less expensive. their properties to be built effi- money is being spent. Many pen- standards in place, to set parame- Technologies that were once ciently. eco-brick in the wall sion and insurance funds now ters for the property industry to considered “niche” and only for The appetite for sustainable have quotas for the amount of operate efficiently and to ensure those who were pre- materials has caused construction money they must allocate towards regulation promotes improve- pared to spend extra companies to invest bil- sustainable activities. ments. money to boost lions of dollars in Second cities attract IT outsourcing Construction “The gatekeepers of money Jean-François Le Teno, head of their environmen- adapting the basic SHARED SERVICES Jan Cienski says the Ed Hammond want to know that there is part of sustainable development at Axa tal creden- materials they use. quality of office space in central and eastern the investment process that Real Estate, the property arm of tials are F r o m reports on green explicitly deals with sustainabil- the French insurer, echoes Mr coming to a l o w - C O 2 Europe is increasing but still offers good ity. For many, it has become a Hughes and points out that being much wider cement to value, especially in smaller locations Page 4 initiatives in key qualification parameter for “green”, once more of a sales gim- market. hemp roof- buildings being considered for an invest- mick to lure environmentally con- At the ing insula- ment allocation. Currently, it is scious investors, is becoming the forefront of tion and The future of building is green necessary to show that the issue norm across the industry. the push is sustainably ENVIRONMENT In former communist here are few indus- of sustainability features some- “It has become a normal topic the construc- sourced tim- countries, Jan Cienski finds shoddy concrete tries so at odds with where in your thinking, rather and not just something for talking tion industry. ber, many the natural environ- than necessarily being able to shops: 18 months ago, it would Long estab- across the indus- being replaced Page 5 ment as construc- demonstrate a prescriptive have been a very different discus- lished as one of try are finding Ttion. Creating the built approach,” says Bill Hughes, man- sion. But, in spite of the trouble in the world’s ways of reduc- environment has always aging director of property at Legal the property market, it has com- most polluting ing the “foot- EC Harris benefits from move east taken a hefty toll on the & General, the insurer. pletely changed in 2011. Within sectors, the print” they leave PROFILE The consultancy recognised the planet. “If you are a large real estate two or three years, it will be building compa- on the environment. opportunities of markets opening up after Today, the industry, long holder, sustainability in its widest ingrained,” Mr Le Teno says. nies that make up “Resource efficiency is unconcerned with its image sense is something you have to “If your portfolio is not green the backbone of the now embedded in the way years of neglect under socialism Page 5 as a serial polluter, is being think about all the time, in terms now, you are taking a chance for property market are many developers work and in forced to change its ways. of how you acquire, asset manage the future,” he adds. increasingly aware of what owners/occupiers want to Now it is not just the envi- and dispose of investments. In The challenge of having an the impact that use of see. When top-end profits shrink, ronment that suffers if future, it is inevitable that there environmentally efficient portfolio environmentally the bottom line becomes more builders shun sustainability will be significant negative issues is one that fund managers across friendly materials can There is great important,” says Aecom, the US in favour of higher profit if you hold property with poor the world are having to get to have on profits. demand for technical and management sup- margins. Customers, too, energy performance characteris- grips with. Customers who would energy- port services provider involved in expect companies to employ tics,” Mr Hughes adds. The task is being made easier as once have accepted little efficient some of the world’s largest con- the most environmentally However, he says he worries sustainability, from construction focus on environmental design struction projects. responsible techniques. If these are not met, order books will suffer. “Sustainable construction Housing will be main Games legacy is not just about minimis- OLYMPICS Delivering on promises to ing the CO2 emissions regenerate London’s east end and provide directly connected with a project,” explains Rachel affordable homes for local people will be Woolliscroft, sustainability hard, says Vanessa Kortekaas Page 6 director at Wates, the UK construction business. Sustainable construction: the UK recycles a large part of its building rubble Alamy “If we want to move Ripe for consolidation towards a more environ- property services group, rather than horizontal ated through the demolition THE GULF Developers in the UAE and mentally friendly construc- who points out that getting kilns, which require less process. neighbouring countries have been hit hard tion model, it is important the materials right in the energy to make the same At the forefront of this by the global downturn. Camilla Hall writes to source building materials construction process can amount of cement. charge is Keltbray, the UK’s in a way that can be sus- save fortunes down the line. However, the construc- largest demolition com- that mergers in this government-dominated tained and does not deplete “The technology is in tion sector doing the most pany. The London-based market may be inevitable Page 6 natural resources and habi- place to revolutionise build- to alter the industry’s group has turned its recy- tats,” Ms Woolliscroft adds. ings, in part by making image is not involved in cling into a standalone busi- The use of computer tech- them smarter – installing creating the new skylines ness. It closely follows the Sustainable shops nology known as building daylight sensors that dim or infrastructure projects scrap-metal markets and reduce costs information modelling artificial light when it’s not that provide the backbone sells off tonnes of copper, RETAIL SECTOR Walmart’s (BIM) has allowed compa- needed; installing wireless for an increasingly urban- steel and iron when prices nies to predict with much meters on equipment so the ised world. Instead, it is the are high. Charles Zimmerman says greater accuracy the type building knows when there companies charged with Keltbray also recently green initiatives do not and quantity of materials is a malfunction; [using] taking away and disposing took a novel approach to just appeal to consumers, needed to complete a software that can analyse of old buildings that are at disposing of the thousands they produce significant project, helping them to cut energy usage trends and of tonnes of earth, or spoil, savings as well, writes back on waste.