Savills: short-term wins on energy costs mustn’t overshadow long-term goals
Sustainability is a consideration that has permeated every aspect of the built environment, write Matthew Fitzgerald and Kelcie Sellers. In the face of an immediate energy price crisis, landlords must retain sight of the long game.
The last few years have seen a combination of company declarations and increasing regulation around carbon emissions, which together are driving a demand for new solutions. Recently, the spike in commercial energy costs in almost every major office market around the world has driven a new focus on building operations for both landlords and occupiers who are exploring and incorporating technologies as a solution.
Although its own carbon footprint and energy intake should also be considered, new users are seeing proptech firstly as a way of bringing full transparency to their measuring of energy consumption, then using the data provided to make informed decisions to reduce use.
The long view
But while this has helped give proptech adoption an added urgency in the last few months, the energy crisis will, hopefully, be a relatively short-term issue to overcome. Longer-term is the push both from a corporate governance and regulatory level towards meeting net zero and reducing environmental impact.
There is consequently a much more enduring role for proptech within the bigger picture of ‘greenifying’ the commercial real estate asset class. Measures such as the Securities and Exchange Commission’s (SEC) rulings that Scope 3 emissions, which can apply to anything in a business’s value chain, must be reported by US companies within the next couple of years are likely to come into force soon, placing a significant regulatory burden on data collection and processes being more accurate and transparent, whilst firms are reporting increased pressure from potential recruits around their ESG pledges.
Evolving occupier needs
As a sector, office occupiers therefore need to ensure that concerns about energy bills aren’t blinding them to the larger benefits the proptech they adopt can provide to help meet these challenges and make a sizeable contribution towards their sustainability requirements. That’s before we even get to the potential wider benefits beyond sustainability and energy efficiencies around using tech, such as helping to right-size space and make it more responsive to other evolving landlord and occupier needs.
There is significant scope for the adoption of proptech solutions as most firms have only recently started to tackle carbon reduction. Currently, according to Deloitte, less than nine per cent of commercial real estate has adopted digital technology or proptech and can be considered ‘smart’. While there may have been an uptick in use recent months, that’s yet to come through in the figures. Therefore, the volume of office space that can still be considered ‘dumb’ is massive.
Many of the advances in technology in recent years allow those in charge to implement more effective strategies to reduce environmental impact, improve wellbeing, and mitigate operating costs across individual office spaces and the wider buildings, by adopting a two-pronged approach. Firstly, by using Internet of Things (IoT) devices such as web-connected sensors and automation tools to give up to-the-minute usage data on ventilation, lighting, utilities, spatial intelligence, security, and occupancy levels.
But data is only valuable if you do something with it. The second prong is therefore around data management: taking the output from every device, system or sensor and managing it effectively through a single software programme to provide comprehensive insight and visualisation into the overall usage and efficiency of individual office spaces, the wider building, and – in some cases – an entire portfolio, then using it identify changes to improve building performance and efficiency.
Strategic, not stranded
Given investment in the proptech industry has grown exponentially (from under $1bn of venture capital investment in 2013 to over $22bn in 2021, according to Pitchbook data), further tech advances are likely to come to help address the scale of the challenge facing occupiers and landlords. But given data from a building’s automation and energy management systems, as well as long-term intelligence on occupancy levels, is rapidly becoming almost a minimum requirement to create a sustainable and productive environment, adopting a strategic approach today is required to not be left behind. While such a strategy needs to look at delivering both short- and long-term benefits, arguably it’s the longer term that are going to prove the most crucial.
- Matthew Fitzgerald is director of Savills EMEA tenant advisory team; Kelcie Sellers is analyst in Savills World Research team