Commercial Property – Shape the Debate: Have your say on engagement, value and risk

• Chair: Keith Bugden, Programme Director, BBP

• Paul Edwards, Head of Sustainability, Hammerson

• Miles Keeping, Partner and Head of Responsible Property Investment, Drivers Jonas Deloitte

• Stuart Bowman, CoreNet• Matthew Tippett, Upstream Sustainability

Services, Jones Lang LasalleBartholomew Room

Commercial Property – Shape the Debate: Have your say…..

Paul EdwardsHead of Sustainability

OWNER OCCUPIER ENGAGEMENT

Key issues….

1. Sharing information is the key to success

2. Owners and occupiers have the same challenges and opportunities

3. Best results can be achieved through partnership and collaboration

Questions…..

1. Who is most responsible for taking the lead in engagement? Owner or Occupier?

1. Owner

2. Occupier

2. Do you think regulation over the past 5 years has helped in any way to improve owner / occupier relations?

1. Yes

2. No

Miles Keeping CEnv MRICS FRSA

Partner, Sustainability

GREEN VALUE

Key issues….One main issue & two key issues

The main issue we really do need to get over:

Value premium or value discount?

Other issues:

What are the key drivers of value?

We all need to be more sophisticated in our analysis!

Premium or Discount: ‘Re-phrasing’ the EvidenceRental Value divergence between energy efficient and non-energy efficient offices – The Netherlands

9

80

85

90

95

100

105

110

115

2006 2007 2008 2009 2010

Green Index Non-green index

Source: The Value of Energy Labels in the European Office Market – Nils Kok & Maarten Jennen – May 2011

Premium or Discount: ‘Re-phrasing’ the EvidenceRental Value divergence between energy efficient and non-energy efficient offices – The NetherlandsSource: The Value of Energy Labels in the European Office Market – Nils Kok & Maarten Jennen – May 2011

80

85

90

95

100

105

110

115

2006 2007 2008 2009 2010

Green Index Non-green index

JLL Prime European Rental Index IPD Netherlands Annual Property Index (Office)

Correlation between Energy Efficiency and Rental Indices

“Generally” Positive

“Generally” Negative

Drivers of value: Some scenario implications

Source: IIGCC (2010)

Sophisticated analysis: Understanding the threats to valueLikelihood of occupiers acting on their policies

0

50

100

Public Sector PLC, B2C PLC, B2B Private, B2C Private, B2B

Sector Source: SIAM LLP

Pro

po

rtio

n o

f re

nta

l in

co

me

(%

)

Strength of carbon reduction policy amongst different business types (based on sample of £1.5bn of tenant-occupied real estate assets)

No Policy

Policy

With targets

Source: Deloitte LLP

Conclusion• Increasingly compelling evidence available supporting value

shift as a result of energy efficiency/wider sustainability factors

• Risk that trend is interpreted as delivering ‘Premium’ or ‘Added’ Value… of greater concern is depreciation and obsolescence

• Impact on property and portfolio performance will be property specific – and not based solely on sustainability credentials

• Impact of tenant demand will be interesting & important to monitor

• Strategy should focus on immediacy, likelihood and scale of impact together with ability to mitigate and harness upside.

Questions…..1. Do you believe there is a link between sustainability

performance and value? 1. Yes

2. No

2. What do you think will be the biggest driver linking sustainability to value?

1. Obsolescence

2. Tenant retention

3. Increasing Regulation

4. Rental value

5. Building Ratings (EPCs, DECs etc)

Stuart Bowman CEng MEI

Director of Breathe Energy LtdKnowledge & Learning Group Leader CoreNet UK

CLIMATE CHANGE RISK

Key issues….

1. Tangible climate change risks

2. How big are these risks?

3. How important are these risks?

Questions…..1. What do you consider the biggest climate change

risk?1. Buildings no longer fit for purpose

2. Escalation of operational costs

3. Insurance availability

4. Disruptions to supply chain

5. None are of significance

2. How important, relative to other business issues, is the management of climate change risk?

1. High

2. Medium

3. Low

4. Not on our radar

Commercial Property – Shape the Debate: Have your say on engagement, value and riskMatthew Tippett, Upstream Sustainability Services, Jones Lang Lasalle

Bartholomew Room