As quickly as COP26 arrived in Glasgow, all traces of the Conference seem to have disappeared. Only time will tell whether a tangible impact is felt in its wake from a global climate perspective. What’s clearer is that the agreements reached in Glasgow, coupled with emerging domestic environmental policies and legislation, are going to have a notable impact on the commercial property sector as we move towards a ‘net-zero’ carbon future.
COP & Carbon
The Glasgow Climate Change Pact’s commitments to ‘Phasedown’ Coal Power and to the ‘Phasing-out of inefficient fossil fuel subsidies’ failed to represent the comprehensive digression from fossil fuel reliance many had hoped for. Still, the general movement towards reducing our dependence will trickle down into domestic policies and legislation- a process which has already begun in the UK.
Approximately 45% of the UK’s carbon footprint is derived from the ‘built environment’, with heating alone contributing roughly 10%. Decarbonising our heat supply is therefore a high priority. Subsequent to COP26, the UK’s Heat and Building Strategy was unveiled and has significant repercussions for commercial, industrial and build-to-rent property businesses. The Strategy offers a regulatory framework for improving the energy efficiency and carbon footprint of existing buildings, as well as setting minimum standards for new builds.
Perhaps more significant however was the pledge of over 450 global finance firms as part of the Glasgow Financial Alliance for Net Zero (GFANZ) to align their financing activities towards achieving net-zero emissions by 2050. This pledge will hopefully focus investor attention on sustainable real estate assets and summon the necessary financial support for the wholesale retrofit of buildings required to meet net-zero targets. According to Savills, the majority of the UK’s Commercial Property Stock requires such investment, with their figures showing that 87% of UK offices currently have an Energy Performance Certificate rating of C or below (‘A’ being the best and ‘G’ being the worst).
Less-publicised declarations and statements impacting the Commercial Property sector were also made at the Conference by various coalitions and countries. These included the ‘UK-IEA Product Efficiency Call to Action’ which set the goal of doubling the energy efficiency of certain globally produced appliances, such as air conditioners and lighting, by 2030. The energy efficiency of such appliances will need to be factored into the overall energy efficiency of buildings in future. Similarly, the declaration on accelerating to 100% zero emission cars and vans included collective vows to ensure only zero-emission vehicles are sold by 2035. Sufficient charging infrastructure to make this transition feasible will need to be put in place, and both new and existing commercial and residential properties will be expected to play their parts. Owners and developers are likely to need to work more closely with local electricity utilities to include charging facilities when designing Housing Developments, Shopping Centres etc.
Commercial Property - a driving force for change?
The Commercial sector is arguably better positioned than the Residential sector to transition quickly due to:
- the size and value of commercial property assets generally being larger, meaning a small number of decisions to make sustainability improvements can have a large positive impact;
- properties are often owned by corporations/institutions which have their own (often ambitious) environmental targets;
- the growth of Green Finance, through initiatives such as GFANZ outlined above, which are likely to be more readily available to larger corporations/institutions than individual homeowners.
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