One Station Hill has been rated as the UK’s best design for air quality.
The Reading office development achieved an AirScore D&O (Design & Operation) Platinum rating, with the highest score certification company AirRated has awarded.
AirScore D&O is AirRated’s review of the proposed design and operation of a building’s HVAC system. Features in One Station Hill’s design include high ventilation rates, high-efficiency particulate filters and active carbon filters.
The office building, due for completion in 2024, is part of the wider Station Hill development, a £750 million ($924 million) mixed-use regeneration scheme by Lincoln MGT, a jv between developer Lincoln Property Company Europe and real estate investment manager MGT Investment Management.
Francesca Brady, CEO at AirRated, said: “It is only in the past couple of years that indoor air quality has been truly recognised as a fundamental factor in the built environment. Our latest research suggested that over 70% of people would have their decision to come into the office positively influenced by a healthy building certification that offered transparency regarding the health of their working environment.”
Johnnie Wilkinson, chief executive of Greenman Group, talks to Sustain about the investment manager’s programme of onsite power generation and diversification.
Greenman’s OPEN fund is the largest owner of food-focused real estate in Germany, with €1.09 billion of gross assets, and is targeting Net Zero by 2050. Generating onsite power through solar PV will be part of this and Greenman is also seeking to cut food miles by investing in vertical farming. These new business lines will also provide diversification of income; Greenman is targeting 5% of income from non-rental sources by 2025.
The motivation for this diversification has been the changing relationship between landlord and tenant, says Wilkinson. “The idea that a landlord buys a property and has this passive income for a significant period of time, has really changed. The landlord, and ESG is one driver of this, is obliged to take a much more operational approach to the building and become closer to the tenant,” he says.
“I really believe that in years to come, rent will be a small proportion of the revenue a landlord collects from that tenant. Ancillary services such as energy will end up being a more significant part of the total.”
Supermarkets are well suited to solar PV installation, because they are single storey buildings with a big roof space. “And secondly the energy consumption by grocers is huge, because of the cold storage,” says Wilkinson. “In an inefficient building, the energy consumption is getting on for 600 kilowatt hours per square metre per year.”
Rooftop solar PV can generate about half of that – in theory. In practice, supermarkets need power when solar is not generating and might not need what is being generated sometimes, for example on a sunny Sunday afternoon. Wilkinson says: “A challenge for us is to work with tenants to understand how they can maximise onsite power use. Moving heating from gas to air source heat pumps is a major win, especially for older buildings. In a best-case scenario, the stores can use 80% of what is generated onsite.”
The next stage is to alleviate heat loss from fridges and freezers, which can be as much as 70 kilowatt hours per square metre per year. Wilkinson believes the long-term solution will be for the landlord to provide energy-efficient cold storage as part of the lease contract.
There is also a challenge in asking tenants to renegotiate their energy contracts, which are typically signed with a single power company for a large portfolio of stores. “Entering into energy contracts with us as opposed to a single agreement is operationally more of a hassle for them, but they see it as a winning point because it is a good story for their customers and they have their own ESG requirements,” says Wilkinson.
Car parks are an obvious location for solar PV and there is German legislation demanding it, which has been largely ignored. “The problem is that tenants do not like anything which obscures view of their stores and branding from the road and street level.,” says Wilkinson. “Nonetheless we are working on it and plan to have 80% of our car parks covered by 2042.”
Battery storage forms part of the plan to maximise onsite power use, however the problem with this is large batteries of the type needed cannot hold power for long, certainly not long enough to run fridges and freezers overnight. In order to use more power onsite, Greenman is installing EV chargers which work well with battery storage. “The more energy we use on site, the better. If we sell it to the grid, we get seven cents per kilowatt, but we get twice that from the tenant,” says Wilkinson.
He predicts that the intersection of real estate and energy will become more and more important. “There is going to be a very big business around owning the ability to generate renewable energy in real estate.”
Vertical farming has been touted as a solution to the conundrum of consumer desire for fresh produce all year round and the need to reduce food miles. It has proven a difficult and expensive business thus far, however structural trends in urbanisation, population growth and a growing middle class in developing nations support its long-term potential.
Greenman has a vertical farming subsidiary, Potager Farms, and will develop the concept at a number of its stores. “We are working with a few tenants to see what we can do to grow locally out of season and help with their Scope 3 emissions,” says Wilkinson.
He believes the real future of vertical farming could be somewhere different, however. “In the long term, where it's really going to be successful, is not at the grocery store, where we're trialling it at the moment, it's going to be in the distribution centres. You can grow incredible amounts of vegetables in a relatively small area, more than one tenant can sell in a day. Whereas if we were to place a vertical farm inside the distribution warehouse, where their lorries are distributing to 10- 20 different stores in a day. That's where scale meets demand.”
As part of its Net Zero journey, Greenman has pledged, wherever possible, not to demolish any of its buildings, instead: “We will repurpose them. So vertical farming might take up first floor units that will never be rented to a retailer. Or an area of car parking that's not required.”
The final part of Greenman’s sustainability plan is to invest in food-linked social projects, which will meet the coming commitments for Greenman OPEN, which is set to convert to become an Article 9 fund. Wilkinson says: “We in the process of converting our open-ended fund into an Article Nine fund, so we will commit to social activities and enabling activities education on solar, food and nutrition. We are going to commit about 0.5% of NAV per year to these initiatives, which doesn't sound much, but the NAV is more than €700 million, so we can do something material.”
The importance of sustainability alongside wellbeing in the workplace has taken centre stage over the last few years, and as our understanding of how buildings impact both climate change and our health grow, so does occupier demand for better spaces in this regard. As a result, developers are pouring more resources than ever before into creating high performing, welcoming and supportive environments.
There is a commercial angle here too. Investors and developers are benefitting from the link between wellbeing and sustainability and real estate asset value, in both leasing and sale terms. These facets of a development are now essential to attracting investment and occupiers as well as maximising longevity and sustainability.
Occupiers and indeed their employees have been a major driver in this process. They are increasingly more rigorous in assessing the buildings they occupy and are demanding the highest ESG standards and flexibility to provide an enhanced experience. A range of multi-use spaces that can cater for everything from private work to relaxation and collaboration, including access to nature, are now a prerequisite.
It’s not just about amenities either. Employers have embraced their pastoral role and want their teams to feel cared for, with a sense of belonging and community and a focus on their physical and emotional wellbeing. It’s important for retention and attraction, but also for their employer responsibility and brand reputation. Employees in turn want to be inspired and encouraged to go to the office.
That said, while we are seeing a lot more businesses commit to wellbeing and sustainability targets, there is still a lack of creative expertise and knowledge; however, we expect this to change with rising understanding and adoption of smart technology, real-time data use, efficient heating solutions and biophilia.
Our 150,000 sq ft 11 Belgrave Road redevelopment in London Victoria is a good example of what a workplace of the future will look like. What does this mean in practical terms? The process of making improvements to sustainability and wellbeing is a hugely detail-led approach. Measures like preparing building materials off site, prioritising non-toxic materials such as timber and stone, as well as low carbon concrete and steelwork, all reduce an asset’s carbon footprint.
Next, the internal environment. Intelligent heating and cooling systems deliver thermal comfort alongside huge reductions in peak demand. Measures like passive ventilation remove fine dust along with carbon filters to remove carbon dioxide and, together with display screens to inform occupants of energy use, empower occupants to better manage their own carbon footprint while creating a better work environment. Tuning a building’s indoor LED lighting to circadian rhythms as well as adjusting the natural colour temperature of any particular time of day also keeps occupants comfortable.
Biophilic design is also key. We have a 2,600 sq ft garden on the ground floor of 11 Belgrave Road – re-assigning prime lettable space like this would have been unheard of, but it’s made our scheme more health and sustainability conscious. Pollution-filtering plants, such as ivy, contribute to the removal of toxic pollutants while helping to regulate indoor building temperature.
Finally, placing workstations in proximity to windows or an atrium will improve lighting, and with smart lighting and solar controlled glazing, can optimise energy savings while improving occupier wellbeing.
Technology like smart apps can also optimise digitally-enabled services to tenants, such as bike booking and charging along with smart lockers at on-site gyms, both reducing the individual carbon footprint of visitors, while also supporting them in their fitness goals.
Apart from higher asset value, better performing buildings are inherently more future-proofed and ready for regulatory changes. They will be at the forefront of the workplace revolution and drive environmental and social value too, ensuring the real estate sector plays its part in a more sustainable world for generations to come.
Ilyas Aslam is chief operating officer at real estate private equity investment and advisory group Quadrum.
Nordic real estate group NREP is boosting its decarbonisation schedule with a new internal carbon tax.
The urban investor, which has €18 billion ($18 billion) of assets under management, has committed to reducing embodied and operational CO2 emissions by 30% and 50% respectively before the end of next year. It is committed to becoming entirely carbon neutral by 2028.
The company says its new internal CO2 tax will “help drive innovation by putting a monetary figure on the cost of carbon”, ensuring the impact of emissions becomes a central factor within its decision-making process.
NREP will be adopting the EU Trading System as its primary carbon benchmark, setting the tax at its current level of €90 per tonne. The tax for embodied emissions during construction will be paid as a one-off at completion while operational emissions bills will be paid annually.
The tax receipts will be re-invested in the respective projects to improve sustainability performance and reduce emissions via a number of measures, including a carbon capture programme.
A recent carbon pricing report from McKinsey claims only 4% of real estate companies have an internal carbon charge, compared with 23% all 2,600 companies it surveyed.
Claus Mathisen, CEO of NREP, said: “Sustainability actions are most powerful when they are taken early on and are at the core of a business. Putting a price on carbon is a great motivator. To reduce the CO2 fee as much as possible, teams are now doing a deep carbon analysis on every building within NREP’s portfolio.
“Our internal carbon tax is a means to an end. It puts us one step ahead in adjusting our business for a greener future, with regulations tightening every year. As such, it reduces risks and drives business value. We see a surge in demand for sustainable real estate, from customers, banks, and investors alike. I firmly believe that decarbonising now will equate to a future advantage.”
Also this week, NREP announced it will build the world’s first net zero logistics facility, which will achieve net zero across operational and embodied carbon without external off-setting.
The project, pictured above, is in Bålsta, 50 km outside Stockholm, Sweden. Embodied carbon will be reduced through low-carbon materials, such as timber and lower-carbon concrete. Carbon neutrality will be achieved during the building’s lifecycle, NREP said.
Last month’s UK mini budget resulted in the type of market volatility usually only seen after a black swan event. What has already faded from memories was the underlying objective of the fiscal measures announced – to boost UK productivity.
This brings us neatly onto the role of the office in a post-Covid world. A recent Microsoft survey found that 85% of bosses say hybrid work makes it hard to be confident that employees are being productive.
Employer space requirements have been evolving for a number of years, tracking the shift from the office no longer being purely regarded as a cost centre but a revenue generator. The pandemic has crystallised the intertwining of space and talent and productivity, with a resulting knock-on effect for investors.
The market polarisation in favour of smart Grade A green offices is widening every month, with high quality services and flexible environments adapted to new working trends.
Recognising this, our green office strategy is about creating new or refurbished resilient offices focused on “4Ss” – meaning buildings which need to be strategically important to occupiers, safe, sustainable and smart assets with building management systems. These intercorrelated pillars are essential as employers and employees demand more productive and more inspiring places to work from.
It starts with smart. Smart building technologies can deliver the above in many ways, from enabling transparent, data-driven building management to creating a compelling, frictionless experience for employees, as well as visitors. And smarter buildings are safer buildings, better capturing who is in them, how they are used, with healthy air management systems and how well they are functioning.
For cities to remain relevant, mobility will be key. Employers across the knowledge economy will have to work hard to persuade in-demand employees to endure a daily commute to and from the office. A building is strategically important if it provides an environment and the ease of access for employees, counterparties and customers to come together in a way which boosts productivity and the culture. Only offices with the right accommodation near to good or newly proposed infrastructure will stack up from an underwriting perspective. Thus, our first asset, White Rose Park near Leeds, UK, will benefit from a new railway station.
The effects of climate change – or rather, climate crisis – now underpin every investment decision. How people can live more sustainably and in harmony with the world's eco-system is a priority. The office sector sits at the very heart of this.
The link between smarter and sustainable buildings is clear – using technology to maximise energy efficiency and allow buildings to work more harmoniously with the environment in which they are situated.
We are heading for an unprecedented wave of obsolescence across the European office sector. Local regulatory pressure and increasing demand for green offices implies a significant portion of European office stock may soon be obsolete, resulting in a growing need to create futureproof office assets in winning cities.
The evidence is clear. The supply demand imbalance and regulatory pressure is driving rental premiums for green office space, ranging from an average of 5.4% in Europe, 10% in the UK and rising to 22.2% in Germany’s Big 7 cities. The investment market is witnessing average sales premiums generated by a green certification of 11.5%.
As the Fed, BOE and ECB hike rates, so financing costs are set to define the office investment market in the near term. Available data shows that green assets can command a cost of debt approximately 25 basis points lower than brown assets, with an expectation that this will only increase. As yields move out, so smart financing – using sustainable debt at lower cost of capital – will also be a key cog in generating returns.
Despite the recessionary backdrop, there remains a war for talent, and the benefits of office working will only become more apparent as the pandemic recedes. This paradigm offers a unique opportunity for those owners and managers with the value creation expertise, to deliver the new generation of green offices in winning Western European cities, transforming assets from brown to green.
Duncan Owen is CEO of Immobel Capital Partners
Singapore’s tallest skyscraper will be one of the most sustainable developments in Asia, says architect Skidmore, Owings & Merrill.
The US-headquartered firm today unveiled plans for a new 305 metre tall, 63 floor skyscraper at 8 Shenton Way in Singapore’s CBD, which will be developed by Perennial Holdings.
The mixed-use development will seek Singapore Green Mark Platinum certification, meaning energy use will be 55% below the benchmark standard. The building will use part of the foundations onsite and lower carbon materials such as recycled aggregates, engineered bamboo and terracotta to minimise embodied carbon.
The design features 10,000 square metres of public green space, with planting designed to encourage biodiversity, as well as terraces and sky gardens. It will be directly linked to the Tanjong Pagar MRT station.
8 Shenton Way also incorporates a variety of safety and wellness features, such as contactless technology, antimicrobial materials, enhanced natural air flow and filtration, adaptable interior spaces, and large outdoor spaces.
SOM partner Mustafa Abadan said: "This building will be one of the first post-pandemic mixed-use towers in the world incorporating health and wellness as its primary design drivers. By seeking to achieve the city's newest and most rigorous sustainability standards, our design will establish a new paradigm for resilient and elegant high-rise design in Singapore and beyond."
Data centres use a lot of electricity: so much, in fact, that they are defined by their use of electricity in megawatts (MW) of power load.
The International Energy Authority estimates the sector is responsible for around 1% of total electricity consumed worldwide, with the figure fairly flat over the past five years. While data centres built in recent times are more efficient, their huge power demands, much of which is used to cool the servers, can put considerable strain on the grid.
Until early this year, Singapore had a moratorium on new data centres, whose power use had grown to 7% of the city state’s total, and even now will only approve three new centres over the next 12-18 months. Amsterdam and Dublin have also introduced moratoriums similar to Singapore’s.
The growth of the digital economy, cloud computing and 5G networks will drive the creation of vast quantities of data over the next decade and all of this needs to be served by data centres. However, real estate investors and managers who develop and own data centres and their ‘hyperscaler’ clients, such as Microsoft and Amazon, are all committed to reducing emissions.
The first challenge is to make the centres as efficient as possible. Data centre efficiency is measured by power usage effectiveness (PUE), the ratio of total energy use to the energy used by the servers themselves. Typical modern data centres operate at a PUE of around 1.3, with some under 1.2. Older centres are far less efficient, however.
Craig Duffy, managing director of fund management at GLP, which is investing in data centres in Europe and Asia Pacific, says: “Sustainable design and operating practice are mission critical for modern data centres. Because data centre operators can spend up to half of their energy cost on cooling, it’s critically important to ensure the cooling equipment is operating at peak efficiency.
“There are techniques that can be used to optimise the air flow within the facility, such as strategic placement of cooling units and leveraging natural convection to minimise cooling power consumption.”
Thomas Liu, real estate partner at private equity firm Actis, which is investing in data centres in Africa, China and South Korea, says the move towards hyperscale centres, rather than multi-tenanted colocation centres, also reduces energy use, as “different tenants in the latter make it more difficult to optimise overall power consumption”.
Nonetheless, the sector still consumes a lot of electricity and, in most of the world, this does not come from renewables. The key to data centre owners meeting their own net-zero commitments, and those of their clients, is sourcing renewable energy. In some cases, this can be bought from power suppliers: however, in markets such as China, all energy must come from the grid, which is largely coal-powered.
Developing data centres close to renewable energy sources has worked in areas such as Canada, parts of the US and the Nordics, where hydropower can be used. A report from data centre operator Digital Realty says firms such as Apple, Google and Microsoft are buying renewables direct from power plant developers and committing to 10-20-year power purchase agreements.
However, Liu says: “It is not straightforward to build data centres in remote areas of developing nations, even if they offer cheap land and access to renewables. Data centres need engineers and it is much harder to recruit outside of major cities.”
On-site power generation is a partial solution, although the huge amount of energy required means that covering a data centre roof in solar panels would scarcely make a dent in the overall energy bill.
One point very much in favour of the data centre business, but hard to quantify, is that it supports lower-emission businesses: the emissions created by video calls are tiny compared with those from business air travel.
Furthermore, says Liu: “Data centres themselves represent an improvement on the prior situation, where you’d have servers distributed around a number of corporate headquarters buildings, which was hugely inefficient from an energy use point of view.”
You can read the full version of this story in the May issue of Sustain
Taking incremental steps in dealing with Hong Kong's existing and often elderly building stock, is crucial to fulfilling the net zero ambitions of the city and its real estate industry, a panel of industry experts said today.
At the ReThink HK conference, the city's largest sustainability event, panellists agreed the city faced a significant challenge and much of it fell on the shoulders of the real estate and construction industry.
Around 90% of the city's greenhouse gas emissions come from building and JLL has estimated that 70% are more than 20 years old. Moreover, 90% of the city's buildings will still be in place in 2050.
Andy Yeung, director and head of technical services at Hongkong Land, identified a number key areas for reducing operational carbon. He said: "The first and the most important step is to set systematic data collection and reporting. The next move is a major retrofit upgrading facilities for a substantial carbon reduction. Adoption of new technologies and smart green technology can further speed up and boost performance in carbon reduction. Stakeholder engagement is also important."
The audience overwhelmingly voted for net zero operations as the most important factor in making Hong Kong commercial buildings more sustainable, with 46% picking this in a poll. The next most significant factors climate resilient design and embodied carbon reduction, picked by 21% and 17% of the voting audience respectively.
The audience also plumped for natural ventilated spaces, alternative building materials and smart building management systems as the new technologies, materials and techniques which will be used in Hong Kong commercial real estate in future.
The panel also cited collaboration across the supply chain and education, particularly for senior staff members, as important for Hong Kong real estate's greener future.
"What we need to do is to get sustainability and the issues regarding carbon to permeate right the way through our organisations, so everybody owns the responsibility for getting to net zero," said Kevin O’Brien, chief executive at Gammon Construction.
The real estate industry has been wrestling with its carbon footprint and how to reduce it for some time. However, until recently, the focus has been exclusively on emissions from building operations, such as lighting, heating and cooling.
But operational carbon emissions are only half the story. The construction of any building generates carbon. Making steel, glass and concrete results in carbon emissions. The transport of materials to and from a construction site and the work involved in erecting a building all involve emissions. It is estimated that 11% of total global carbon emissions come from building construction and materials.
Now the industry is beginning to look at the whole life cycle of a building to assess its emissions and it is driving changes in behaviour. Peter Epping, global head of ESG at Hines, says: “We need to be careful about which buildings we are knocking down and whether the benefit in terms of reducing operational carbon over time or other benefits are worth the embodied carbon of building new. No matter how green a building is touted to be, you still spend at least 30 years of operational carbon in its development.”
As building operations becomemore efficient, the embodied carbon in a building becomes more important. The longer a building can be preserved, the more the carbon involved in its creation can be ‘amortised’.
Billy Grayson, executive vice president, centres and initiatives, at the Urban Land Institute, says: “According to most estimates, embodied carbon accounts for as much as half of a buildings’ total carbon emissions over its lifetime. If we can develop strategies to use lower-carbon building materials and construction strategies, we can make significant progress in reducing overall emissions from the real estate sector.”
Projects that attempt to minimise embodied carbon can benefit from green building certification. Many of the major certification systems, including LEED, BREEAM and EDGE, consider embodied carbon.
Earlier this year, a pioneering low-carbon certification programme for real estate was launched in Europe, garnering support from real estate investors such as Ivanhoé Cambridge and Generali Real Estate, as well as the French BBCA association.
Like most exercises in making real estate more sustainable, measuring and assessing a building’s total carbon emissions over its projected life can help developers and investors judge its impact. A whole building life cycle analysis (WBLCA) attempts to account for all carbon sources present throughout a building’s life. Such analysis – while obviously requiring a certain amount of speculation – can give a more balanced picture of a project’s impact and might even sway decisions on whether to embark upon it.
To reduce embodied carbon, the real estate industry needs to embrace the four ‘Rs’: reduce, reuse, replace and recycle, says Grayson. Reducing the raw materials and energy used in the construction process will reduce embodied carbon. This might involve using modular construction to reduce waste and transport emissions, or producing materials on site. Of course, simply creating fewer buildings and instead refurbishing existing stock naturally reduces the use of materials.
Reuse could involve using the materials from the construction of one building for another, or they could be recycled. “Recycling all construction waste and using recycled materials for construction can also have a positive impact on reducing embodied carbon,” says Grayson. Developers are beginning to replace carbon-intensive building materials with lower- carbon or renewable materials, such as timber, lower-carbon concrete and recycled steel.
Such considerations are increasingly tipping real estate investors into refurbishing and improving existing buildings rather than demolishing them and building afresh. Grayson says: “Usually, refurbishment or repurposing of obsolete properties is better than redevelopment, from an embodied carbon perspective.”
However, refurbishment is not always the best option: it might be impossible for a building to be brought to the required specification, for example. As construction becomes lower- carbon, the balance may also swing back in favour of new buildings, especially if the building they replace can be recycled.
Using the four Rs to reduce embodied carbon should also not come at a cost; using less energy and materials in a project tends to mean lower costs. Furthermore, lower-carbon materials are often similar in cost to their standard equivalents, the ULI’s Embodied Carbon in Building Materials for Real Estate report argues. New technology is emerging to help the real estate industry reduce embodied carbon.
Epping says: “It is very encouraging to see considerable innovation in the field of low-carbon construction, whether that is low-carbon cement, low-carbon steel or other materials.”
For example, advances in structural timber are making it a practical solution for large scale commercial buildings, even lofty skyscrapers, while solutions are emerging for concrete which are not just lower-carbon but carbon negative, as the making of the concrete involves storing carbon dioxide.
Throughout a building, the choice of materials will affect its final embodied carbon footprint. “Everything down to the choice of carpets can make a difference. And that’s why we were pushing really to getting environmental product declarations (EPDs) for everything we use in a building, so we can have a ‘carbon P&L’,” says Epping. Environmental product declarations will allow purchasers to weigh up the environmental impact of a product.
Embodied carbon could be further reduced by employing circular economy techniques. The circular economy refers to the constant reuse and recycling of materials to reduce waste, carbon emissions and pollution. This might involve reuse of buildings or the recycling of existing materials into new buildings.
Grayson says: “Circularity teaches us [that] any industry’s waste products should be a feedstock for other industries’ processes, and that we should figure out ways to reduce lifecycle environmental impacts by efficiently integrating different industries in the efficient use, reuse, and recycling of materials.
“If buildings were built from rapidly renewable materials and designed for adaptive reuse and disassembly, it would significantly reduce their life cycle greenhouse gas impact and contribute to the circular use of materials as feedstocks for future buildings and other beneficial manufacturing processes.”
Part of the challenge of reducing embodied carbon is in persuading people to consider it, how to measure it and how to reduce it. “We have seen that introducing this topic into the conversations with architects, designers and contractors means people get up to speed quite fast and act smarter. If you had mentioned this topic two years ago to anyone, they would probably just have shrugged their shoulders and looked for someone else to work with,” says Epping.
Hines has contributed to the debate by publishing an Embodied Carbon Reduction guide, which explains the topic and gives some detail on how it might be addressed by the real estate industry.
And it must be addressed, not least due to the existing and future legislation which is expected for the sector. For example, the Netherlands’ commitment to economic circularity by 2050 involves a requirement that the building sector reduce its raw materials use by 50% by 2030. Since 2013, all new buildings have been required to conduct a whole building life cycle analysis.
As noted in Sustain’s May issue, a number of new-build projects in cities across the world have been rejected, due, in part or whole, to the carbon emissions associated with their construction.
The major push factor for the real estate industry, however, is likely to be the wider implementation and higher cost of carbon taxes. Some 40 countries and more than 20 cities, states and provinces already use carbon pricing mechanisms, with more planning to implement them in the future, in order to shift the burden of climate change onto those who are responsible for it.
For example, in April, Singapore announced it would be revising its carbon tax and raising it incrementally to change behaviour. From 2024, large emitters in Singapore will have to pay S$25 (US$18) for each tonne of carbon dioxide equivalent emitted, increasing to S$45 in 2026 and 2027, and eventually to between S$50 and S$80 by 2030.
Once carbon taxation expands to more countries, developers will have a strong financial incentive to take action and reduce embodied carbon.
Wood has been a primary material for construction for thousands of years and is still a popular building material, primarily for homes, in timber-rich nations such as the US, Canada and the Nordic countries.
However, it has had something of a renaissance in recent years, due to a greater appreciation of its environmental benefits and advances in technology which mean it can be used in larger buildings. Modern engineered timber products, such as cross- laminated timber, can be used in the construction of commercial properties, for everything apart from foundations.
Ascent, a 25-storey apartment block in Milwaukee, Wisconsin, in the US, recently topped out at 86.56m, making it the tallest timber building in the world, overtaking several recent projects in the US and Europe in the 80m range. However, Ascent is set to be overtaken in a few years by Rocket & Tigerli, a residential project in the Swiss city of Winterthur, which will have a 100m tower.
For a growing number of real estate investors, the use of timber is a way to reduce the embodied carbon of new developments. As Olli Haltia, senior partner and CEO at sustainable timber investment adviser Dasos Capital, says: “Wood is basically solid carbon.” The emissions from engineered timber construction are lower than from concrete and steel, furthermore, when timber is sourced from renewable forests, it is replaced with new growth which will absorb tons of carbon before it is harvested (see chart). Wood can also be recycled, to be used in construction again or as fuel.
Dasos has teamed up with Australia’s Cromwell Property Group to launch a €1 billion wooden buildings fund, which will invest in timber buildings across Europe. Pertti Vanhanen, managing director, Europe, for Cromwell, says: “Wooden construction reduces the embodied carbon in real estate and thus matches the objectives of institutional and other advanced real estate investors who are serious about carbon neutrality.”
The use of engineered timber products is growing by around 11% a year, says Haltia, and there is capacity to increase timber production all over the world, by allocating more land and using more efficient forestry methods.
Well managed forests act as a carbon sink and soon regrow timber used in construction. For example, as revealed in Cromwell’s Timber buildings – Truly sustainable real estate report, a 2020 study estimated the wood required for a 5,000 sq m office building would be regrown by Austria’s timber forest in nine minutes.
One downside to timber construction is that it is more expensive than steel and concrete, although greater production will make it cheaper and a greater focus on the environmental cost of construction will make it more attractive. Timber is also suited to offsite modular construction, which can reduce costs.
Another barrier to growth is concern about the material’s safety, particularly with regard to fire and water damage. Engineered timber is no greater fire risk than other modern building materials and is accepted in markets such as the US and the Nordics. However, in markets such as the UK, where timber is little used, some scepticism remains, says Vanhanen. “UK building regulators are conservative, they still remember the great fire of 1666,” he says.
There are also benefits for occupiers from using timber. It is an effective insulator, so can improve building energy performance and some studies suggest wooden buildings improve wellbeing. Cromwell research suggests recently-let wooden buildings in Europe achieve a 9% premium to local prime office rents.
Timber commercial real estate is not limited to Europe and North America. In Singapore, famous for glass and steel skyscrapers, Nanyang Technical University is building a 40,000 sq m academic building. And in Tokyo, timber was used for architect Kengo Kuma’s Olympic stadium.
Also in Tokyo, Sumitomo Forestry has proposed a 350m, 70-storey skyscraper. The project is a long-term one, slated for the company’s 250th anniversary in 2041 and the current project cost is $5.6 billion, twice that of a concrete and steel equivalent.
The real estate industry’s recent focus on reducing embodied carbon is set to take wooden buildings to new heights and bringing new growth to a very traditional construction material.