Why are carbon savings from commercial properties so important?

06/03/2019

We have been warned by the IPCC that we may only have 14 years to prevent severe climate change. This time period is only two business investment cycles. If we don’t act with urgency then our changing climate will result in more frequent extreme weather events - i.e. flooding, heat waves, wildfires - which could impact all property values and be expensive to insure against.

If time is of the essence then reducing carbon emissions earlier in that period of 14 years should be more valuable than later. We should recognise this NPV of carbon in evaluating the best ways to reduce emissions. Projects and programmes which deliver emissions reductions later in this period should be discounted compared to those who can provide earlier savings.

Buildings contribute between 30%-40% of global carbon emissions. In large cities, like London, they contribute 74% of the city’s emissions. In the timeframe of 14 years, it is the existing building stock which is the largest part of the problem as new buildings account for <3% change in the building stock. A focus on reducing emissions only from new buildings will have a small impact, particularly when the UK target is only a 50% reduction by 2030 and not net zero - too late! Now whilst a large proportion of the existing buildings’ emissions are from homes, each home is small, they are high in number, widely distributed and difficult to engage with as the majority are individually owned. The cost of acquiring a tonne of CO2 reduction is high, as is the cost of implementation and the benefit from each intervention is small.

By comparison, each individual commercial property is typically much larger and so are the associated carbon emissions. About half of the emissions from commercial property is from larger properties over 5,000m2 and they are often close together in urban locations. The ownership and occupation of these properties is usually by private and public companies, and often they own or occupy multiple properties in a portfolio or estate. Therefore the cost of acquiring a tonne of CO2 reduction is much reduced compared to the domestic market.

There are hidden savings in commercial properties. In 2016, the UK Government published via InnovateUK a 4-year, £8m study called the Building Performance Evaluation. It evaluated the performance of 50 commercial properties and compared the existing carbon emissions for Building Regulations compliance with actual operational performance. The study found that every single property emitted more carbon than expected. On average, emissions were 4x higher with the worst performing property emitting 10x. Most of this energy wastage and unnecessary carbon emissions came from issues with the HVAC and BMS. Not faults with the fabric, but operational fixes. Building Regulations could be enforced to address this problem or clients could introduce a more stringent Carbon Performance Acceptance Test at Practical Completion, but this is not standard practice at the moment.

Once these issues are signed off at Practical Completion, it is highly likely that these emissions remain built-in. Over the course of the first year of occupation, the energy bills will be received and an energy (and emissions) baseline will be created. In the following year, energy consumption will be monitored against that baseline and targets will be set to reduce consumption. The assumption is usually that capital expenditure is required to get any reduction below this baseline, but that’s not the case because the HVAC/BMS has never been optimised. These savings from optimisation require a maintenance fix from the controls or M&E engineer, and can be factored into a maintenance regime.

In recent years, the property and facilities management market has seen the introduction of new technology - BSRIA call this Building Systems Analytics. Property investors who have used these analytics to run their commercial properties have seen sufficient reductions in energy costs to pay for this new technology within just 9 months. This is a completely different approach to making the business case for capital expenditure to deliver carbon reduction projects with a payback over 2-3 years or longer.

The opportunity to deliver early carbon emissions reductions from commercial properties is significantly higher than in homes. It is possible to deliver annual carbon savings in 100 commercial properties which is equivalent to running 5,000 homes for a year. Building Systems Analytics are quick to deploy in less than half-a-day, so scaling from 100 to 1,000 properties is possible and quicker than making 50,000 existing homes zero carbon. Or 2.5m homes just 2% more efficient, which is what the £11B UK Smart Meter programme is aiming to deliver.

To tackle the challenge of climate change, we have to reduce emissions in all types of buildings, both new and old. My case for focusing on commercial properties right now is that the value of getting those carbon savings early is worth so much more. We have limited time and money to invest now and this provides the best return.

There are co-benefits for property owners and occupiers in using Building Systems Analytics. The problems which Building Systems Analytics identify is based on the condition of the HVAC and BMS. These problems usually have another impact on the operation of the property. As well as wasting energy they are usually causing comfort and wellbeing problems for the building users and/or increasing the wear and tear of the building services equipment. By using Building Systems Analytics to prioritise the maintenance of the hard services, it is possible to make better use of the available engineering time which is of particular importance as we see more non-technical Building Managers on-site and the UK has a shortage of engineers.

At 55 Bishopsgate, a property owned by Schroders Real Estate, MJ Mapp has worked with Demand Logic’s Building Systems Analytics. Together, in the first year, we’ve been able to reduce the energy bill by over 10%. In addition, we’ve been able to reduce the time required for maintenance. This has delivered a similar, additional saving in maintenance costs and has delivered a better service for the tenants because the prioritised maintenance has reduced hot/cold calls. Demand Logic was paid for within the service charge and provided a return on investment within 6-9 months. M J Mapp have now entered into a strategic partnership with Demand Logic to extend this approach to other commercial properties to deliver quick carbon reductions and have a platform that enables the collection of a wider range of building performance data.  These data will in time be leveraged further, measuring health and wellbeing indicators, and enabling data led discussions with clients and occupiers, to better inform space planning and fit-out.