ESG is a hot-button topic for many organisations around the country, particularly within the built environment where 25% of the nation’s carbon footprint is created.

It is easy to associate the negative impact on the environment with burning fossil fuels and using single-use plastics. But a big cause of carbon emissions in the property and real estate industry is dilapidations.

What is “dilapidations”?

Dilapidations is derived from the Latin phrase “scattering of stones”. Nowadays, it is used to describe the process of a building falling into disrepair. In our industry, it also means bringing that building back to life.

A part of the problem

Unfortunately, as our tastes change, buildings are being stripped and refurbished at an ever-increasing rate. This constant cycle of throwing materials onto landfills, replacing M&E items, and restoring everything with similar or identical assets, is a huge part of the problem.

Short lease cycles of CAT A/B buildings mean that the strip-out and fit-out culture goes unchecked, creating unnecessary waste. We must find a way of achieving tenant/occupier satisfaction and landlord/owner compliance.

The effect on communities when building works disrupt the flow of the day is also problematic. Traffic congestion and fly-tipping can bring down the reputation and commercial prestige of an area, going completely against what is trying to be achieved with new enhancements.

Materials should last longer than one lease, especially if they are custom-built for the building.

Sustainable office and retail space is a big talking point within architecture and design circles, often linked to wellbeing – due to the relatively new, flexible nature of our working patterns.

To this end, the industry could introduce clauses that specify keeping and caring for the fit-out they signed onto. Incentivisation could also help this concept succeed.

Productive and transparent communication between landlord and tenant is key, but is it a concern of the landlord to put ESG at the forefront of their portfolio?

A change in thinking

In a report published by PwC, 70% of European real estate owners said they were concerned about environmental issues, and 72% believe it will be a tangible issue for them within the next 5 years. However, many admitted that keeping the environment as a priority was difficult.

Nevertheless, real estate owners and developers should keep ESG in their sights as increased regulation will force them to update their commercial and residential properties.

That being said, 69% of respondents to Knight Frank’s European Living Sectors Investor Survey categorised investors as “important” or “very important” when influencing their approach to ESG – well above regulatory change (65%) and tenants (52%).

This suggests that it is in our hands. And there are reasons to be optimistic.

The same report claimed that 38% of owners and developers are looking to include solar power in new developments, with 31% targeting a minimum EPC A.

If landlords are looking to achieve high EPC ratings, collaborating with their occupiers will be crucial, and that starts with the lease itself.

https://www.eddisons.com/