Radical action from landlords and tenants needed to drive decarbonisation, says ULI
Progress on the decarbonisation of real estate is being held back by a lack of understanding and collaboration between property owners and occupiers, according to a new report from the Urban Land Institute C Change programme.
The report claims that, if better alignment between the two parties is not prioritised, it has the potential to increase total emissions from the built environment over the medium to long-term. The Occupiers and owners: Faster and further on the pathway to decarbonisation together report argues for a “fundamental questioning of many current working practices and structures”.
The research was based on interviews with heads of real estate for large corporate real estate occupiers from wide range of industry sectors.
Lisette van Doorn, CEO, ULI Europe, said: “This report demonstrates the main issues with collaboration, which are often related to historic ‘transactional’ relationships, variations in decarbonisation objectives and perspectives, and longstanding approaches to areas such as lease structures, contracts, and fit outs, which all need careful reconsideration.
“At the heart of progress on this topic is that owners and occupiers build a trusted long-term partnership that considers each other’s objectives, which requires each side to be open about their perspectives and the wider concerns faced by each stakeholder.”
The report cites a number of factors hindering progress, including:
- Occupiers not factoring in embodied carbon emissions when selecting new space to lease, leading to a preference for new space over retrofitted buildings
- A lack of standardised green lease structures
- Lease requirements forcing the removal of usable fixtures & fittings at the end of a tenancy, made worse by shorter leases
- Occupiers not prioritising decarbonisation of real estate
Going forward, the report argues for more standardised practices, including in the approach to due diligence for occupiers seeking space, and for ESG considerations to be included as standard in heads of terms with minimum requirements considered as non-negotiable. However, ULI recognises such changes will require education and industry wide commitment.