Wybo Wijnbergen, CEO, infinitSpace
The march toward net zero is an unstoppable – if frustratingly slow – motion. Environmental activists and, in growing numbers, the public are translating their concerns over climate change into genuine demand for policy change. The commercial real estate market knows this and has already seen it. On the one hand, the state is setting landlords increasingly ambitious energy performance standards while, on the other, both current and prospective tenants are demanding a commitment to sustainable practices, and they are ready to go to the competition if necessary.
Over the past five months, infinitSpace has been releasing the findings of research commissioned in partnership with the Instant Group, exploring the state of sustainability in the UK office market. The research, polling 250 UK office landlords, provides a forensic pulse on the challenges and motivating factors facing the market as it moves toward net-zero targets, as well as revealing the current state of play.
The current state of play
The research identified the level of adoption of sustainability policies in the UK office market and whether these combined to form an overall green strategy.
It defined a sustainability or environmental policy as a measure – be it a policy, initiative, or standard – that aims to reduce a building’s overall carbon emissions and/or promote more efficient energy practices.
Correspondingly, 42% of landlords said they have individual sustainability policies in place but no overall strategy, 23% said they were unaware if there were any and 5% said there were none at all. Meanwhile, 30% of landlords said they have an overall sustainability strategy in place, comprising several sustainability policies.
While an encouraging 72% of landlords have at least individual sustainability policies in place, the minority of this group (30%) are lacking an overall strategy, suggesting a lack of direction in the design and implementation of policies. Until more guidance and expertise are shared with landlords to shape an overall strategy, those calling for an accelerated pathway to net zero are likely to find their patience tested – a point repeatedly made throughout the research.
Therefore, it’s not terribly surprising that close to half (47%) of landlords believe the office market is lagging behind other areas of the property sector in implementing/adopting environmental policies.
From infrastructure upgrades to policy targets, the research identified the most popular measures landlords are implementing to improve energy efficiency and overall sustainability,
Currently, 31% of landlords have set waste management targets, 25% have adopted thermal efficiency measures (24% have adopted double glazing), 25% have converted part of their space into flex space, and 23% have adopted sensor controlled/timed light or LED/high-efficiency lighting.
In a remarkable sign of long-term commitment to sustainability and energy efficiency, across each measure, around 90% of landlords plan to adopt them over the long term.
The appeal of flex space highlights how the office market’s hottest service is not only bolstering the appeal of a workspace building but driving green targets by maximising space and electrical efficiency.
The rise in energy prices across the UK has also played a significant role in accelerating demand for these measures, with 55% of landlords agreeing that it has incentivised them to improve the energy efficiency of their buildings.
Motivations and challenges
Landlords are drawing green inspiration from a variety of places, the most popular being to keep pace with competitors, according to 41%. The prevalence of this factor highlights how competitive the UK office market is and the role of sustainability now serves as a market battleground.
Close behind – and an encouraging sign of osmosis between business and the public – was a personal or organisational desire to play an active role in reducing climate change with 37% of respondents agreeing. Meanwhile, 33% cited the retention of existing tenants and the need to comply with regulatory demands.
The varied and widespread nature of factors shows that office landlords are not lacking in motivation to improve sustainability across their portfolios; net zero has become both a commercial and ethical imperative. However, many office landlords are struggling to get to grips with sustainability.
Notably, 49% of landlords agree it is difficult to keep up with regulations on energy efficiency and that the cost of improvements is too high. Even more (53%) say that they are unsure how to effectively go about this.
The correlation between occupancy and sustainability
The research also revealed the poor state of occupancy across UK offices, itself a major factor in the overall energy efficiency of a commercial building, as 84% of landlords reported occupancy as less than 70% and 53% said their offices were half-empty or less.
Landlords’ sense that sustainability has become a major source of competition in the office market proved particularly prescient. Indeed, of those with an occupancy of greater than 70% in their office building, there was an uptick (88%) in the number of landlords who had an overall sustainability strategy (56%) or at least individual policies (32%). Landlords are acutely aware of this, with 48% of landlords agreeing that having strong sustainability policies is essential to attracting tenants.
The way forward – don’t be shy to ask for help
With around half reporting difficulty in keeping up with regulations or agreeing that they require help to shape their environmental policies, landlords were transparent and showed great self-awareness about the knowledge gap that must be overcome if ever the office market is ever to cross the green bridge.
Landlords should not blame themselves for lacking the required expertise. Installing infrastructure upgrades or setting sustainability targets inherently requires a level of knowledge of the appliances as well as their application. As technology continues to advance, this pre-requisite level of knowledge only becomes more advanced. Moreover, with the cost of making sustainability improvements so high, as cited by half of landlords, many are understandably fearful of investing in a measure that may become obsolete in a handful of years.
Consequently, landlords are seeking outside support from third-party workspace providers, with 92% of landlords either already or planning to outsource the implementation and development of sustainability policy to a third party.
Landlords have a lot to juggle already, so it is encouraging to see the number of landlords turning to experts. Workspace providers such as these can not only advise on the specific measures that would best serve a specific office building but weave multiple policies together to form a coherent sustainability strategy. Moreover, with rising costs impacting every sector, providers can build a strategy to work around a landlord’s budget.
While the future of the UK office market is certainly green, there is still quite some way to go. However, as challenges, in particular a sizeable knowledge gap, are overcome, there is a pathway to net zero that has already begun.
Sceptics should look again at the 90% of landlords planning to implement nearly every energy-efficient measure widely available, the number of landlords wanting to play an active role in climate change; and for the most cynical: the key revelation from landlords that occupancy and competition is becoming ever more dependent on sustainability.
Wybo Wijnbergen is the Co-founder and CEO of infinitSpace, a company that enables office landlords to easily create and run a flexible office space under their brand and conditions. Prior to launching infinitSpace, Wybo was a Managing Director at WeWork, where he helped oversee the company’s expansion across Western Europe.