Bywater Properties' sustainability journey has taken a dramatic turn in recent years, says chief executive Patrick O’Gorman. An investigation into the use of mass timber in its UK developments led to a £1 billion joint venture with Sumitomo Forestry and, this year, the Japanese company taking an ownership stake.
“Sumitomo Forestry is an enormous company in terms of history, culture and financial firepower, which will enable us to fulfil our ambitions of innovating and leading the built environment with a focus on reducing carbon, across the UK,” says O’Gorman.
Bywater was founded by Richard Walker, executive chairman of British supermarket chain Iceland, and ex-JLL consultant Theo Michell in 2007. Early developments were in Poland but after O’Gorman joined in 2013 (he is a former CEE capital markets head at CBRE), the company refocused on UK projects with a strong sustainable element. Chairman Walker is one of the most outspoken voices on sustainability in British business.
The company’s flagship project and its first using mass timber is Paradise, a 63,250 sq ft office development in Lambeth, South London, which will feature a cross laminated timber structure and will be zero carbon in operations.
“We wanted to do something very special and make a big impact in the project and thought that using timber would have an enormous impact on reducing the embodied carbon,” O’Gorman says. However, in 2018, thinking about embodied carbon and timber was ahead of the curve in UK real estate, with most firms focusing on operational emissions.
Sumitomo was originally targeted as a funding partner for Paradise but its commitment and enthusiasm for sustainability and using timber sustainably accelerated the relationship. O’Gorman says: “We knew they were committed when, in 2021, they sent a team to visit us for three days, committing themselves to 14 days in isolation as a result!”
With Sumitomo’s financial backing and 51% stake in the company, Bywater’s future looks bright, however O’Gorman points out that timber construction in the UK, where it is relatively rare, is not straightforward. “We are learning with every project because it is it is complicated and there are risks. We need to be in line with the requirements of planning authorities, the fire service and other bodies.”
Following the Grenfell residential tower fire in London in 2017, where 72 people died, there has been a considerable focus on the use of combustible materials in building, he adds. This affects Bywater, even though timber was not at fault in the Grenfell tragedy.
Using timber for construction sometimes involves slightly higher costs, O’Gorman says. Paradise was originally estimated at a 3% premium over a more conventional build. It is not necessarily the cost of materials, but other factors. For example, a timber designed building is more likely to require larger sprinklers, which increase cost and reduce space. Meanwhile, the fire test for Paradise added “several hundred thousand pounds” in design costs.
Bywater plans to have three timber projects underway by the end of this year, two of which will be office refurbishments with two storey timber extensions, and another three next year. The firm’s primary focus will be on reusing existing buildings, but O’Gorman is concerned that planning authorities might take a too restrictive approach to new developments.
“Innovation is very important part of what we need at the moment and, without new builds, we fear we won’t be pushing innovation enough. Developing low carbon concrete, recycling steel and using timber requires further innovation and there is more scope for that in new developments.”
Paradise does not use quite as much timber as Bywater had hoped, due to fire safety requirements forcing a concrete core, however "other than that most of the remaining structure will be mass timber," says O’Gorman.
Research from Sumitomo and others worldwide is finding that working in a wooden building lowers stress and aids concentration. Sustainability and health benefits of the project feature heavily in its marketing, reflecting what London office occupiers are looking for. O’Gorman says the response from prospective tenants has been positive so far, not least because sustainability is rapidly become a must for London office occupiers.
“When we started the process, we were advised that the potential occupiers would not be interested in embodied or operational carbon stats, or energy use intensity stats, but that is far from the case. When we are presenting to tenants, we find they really understand the metrics, they know what's good and what's bad.”
The company is focused on workspace at the moment, but has begun investigating the “living” sectors, multifamily, student housing and single family homes. Sumitomo built 25,000 single family timber homes last year, so its expertise could be invaluable.
“We are short of homes in the UK, especially affordable homes and it is one of our biggest social issues,” says O’Gorman. “We hope that using timber and modern methods of construction, we can do something to help.”
Heimstaden has appointed Eva Bienias as group director of environmental sustainability.
In this new role Bienias will be responsible for the formulation and implementation of environmental policies at the Swedish residential investor and manager, which operates in 10 European markets.
She was previously sustainability manager at Heimstaden Netherlands, which she joined in 2020, and has more than 12 years of experience in the real estate industry.
Chief sustainability officer Katarina Skalare said: "We are thrilled to have recruited Eva into this new role at Heimstaden. Her extensive expertise in real estate, paired with her proven track record of conducting sustainability projects during her four years as the sustainability manager at Heimstaden Netherlands, positions her ideally to drive our environmental initiatives forward."
Sustainability-driven refurbishments are driving office development in London, according to Deloitte.
The professional services firm’s latest London office crane survey found there are 124 office schemes under construction, totalling 15 million sq ft of space. The UK capital has seen the highest volume of new office starts on record, with 5.1 million sq ft of new construction starting across 43 schemes since the spring. Refurbishment projects account for 3.3 million sq ft in 34 schemes.
The increase in refurbishments has been driven by the anticipated tightening of Minimum Energy Efficiency Standard (MEES) regulations and occupier demands for space which matches their own sustainability commitments and aspirations, said Deloitte.
The UK government intends that all commercial buildings must have an energy performance certificate rating of C or better by 2027 and B by 2030. Owners will not be able to lease out buildings which do not meet the standards or do not have an exemption.
Philip Parnell, partner and real estate valuation lead at Deloitte, said: “Occupier focus on premium space, coupled with addressing the anticipated MEES deadline and drive to net zero, is continuing to provide a strong stimulus to refurbishment activity. This is a trend that is countering the backdrop of an otherwise challenging macro-economic environment.”
London developers told the survey they expect achieve operational net zero across their portfolios by 2040. However, they highlighted the cost of construction as the biggest obstacle to achieving net zero.
A whole life cycle approach to buildings is needed for real estate to hit Paris Agreement targets, a new report argues.
Investment manager DWS's Decoding Carbon in Real Estate: Strategic implications of taking a whole lifecycle approach report says refurbishment of existing assets and greater use of low carbon materials will give real estate a better chance of reducing its emissions.
The report notes that embodied carbon in construction accounts for 11% of global emissions. As a consequence, refurbishment is increasingly targeted over development in some markets, such as the UK, where refurbishment is now more common than new development in the London office sector.
However, regulations and voluntary standards remain behind the curve on embodied carbon, the report says. Neither CRREM nor GRESB have integrated embodied carbon into their assessments, although both are considering this for 2024. And while green building certification regimes LEED and BREEAM both include assessments of carbon on a whole lifecycle basis, the main weighting of scoring is on minimising energy use at the operational stage.
Many nations lack databases detailing the embodied carbon of construction materials, says DWS and existing databases use different materials, assumptions, units of measurement, and standards of data verification, “making the data difficult to compare”.
The industry needs to balance embodied and operational carbon considerations, DWS says. For example, triple-glazing creates more embodied carbon than double glazing but is 40% more thermally efficient.
The picture is complicated because whole life carbon assessments can vary widely in their outcomes, depending on methodology. DWS gives the example of the proposed Marks & Spencer store redevelopment on Oxford Street, London, where the carbon lifecycle assessment included in the store’s planning submission was challenged by heritage groups on the basis that flawed assumptions were used to portray a new building as the lower carbon option.
However, a 2021 study by Arup, while demonstrating that refurbishing existing buildings is the lowest carbon option using a whole lifecycle approach, a new building constructed to the highest environmental standards is not significantly worse.
A rigid focus on refurbishment risks leaving some assets not just stranded but abandoned, Patrizia’s UK & Ireland development chief warns.
In an interview published on the European real estate investment manager’s website, Dan Williams, head of development for the UK & Ireland talks about “brown to green” refurbishments, saying: ““We believe in the opportunity to move brown into green. It is one of those rare examples where there is a strong investment case and, at the same time, it will make a real difference to cities.”
However, he also notes that some buildings simply cannot be refurbished, especially in the office sector. In a difficult office market, investors are reluctant to fund retrofitting a redundant building. The issue is complicated by the fact that many office blocks were only built to last 25-30 years.
“You can end up with weird circular arguments concerning embodied carbon,” Williams said. “Yes, we should be reusing buildings, we shouldn’t be knocking them down, but the question arises: if you can’t reuse them, what do you do with them? This is particularly relevant when there is a housing crisis going on across Europe.”
Property owners and developers need to look again at the impact of construction and redo calculations concerning refurbishment and construction. When developers are looking to construct, Williams said, they need to look to the longer term – up to 100 years, which will also impact costs.
Hines has launched a masterplan for a new environmentally and socially sustainable mixed-use project in Milan.
The developer’s Ex Trotto Milano (EXTM) urban regeneration project aims to transform a 130,000 sq m former horse racing track, abandoned since 2012, into an inclusive and sustainable urban district.
The €450 million ($482 million) project will deliver affordable rental housing, senior housing, community amenities and a 50,000 sq m public park, as well as for-sale residential and rent-capped retail for local producers. The new buildings are targeting net zero energy operations.
PGIM Real Estate and Cornwall Pension Fund are to build an affordable housing scheme in Cornwall, UK.
The 67-unit single-family housing scheme, located in Tuckingmill, Camborne, is being developed with strong ESG credentials, with homes being let at affordable rents and incorporating energy efficient technologies.
The investment is the first for the co-investment scheme between PGIM and the local government pension fund, which aims to acquire, hold and manage affordably let single-family rental housing in Cornwall.
Oscar Kingsbury, portfolio manager of the UK affordable housing strategy at PGIM Real Estate said: “Whilst Cornwall is a popular tourist destination, it is also one of the most economically challenged regions in the country. There is significant demand for high-quality, energy efficient housing, let at affordable rents.
“The aim of our co-investment with Cornwall Pension Fund is to help to alleviate the shortage of affordable rental accommodation in the region. The investment in Camborne will deliver much needed housing for working people and families, whilst producing sustainable income for the co-investors.”
Since its launch in December 2020, PGIM’s UK Affordable Housing strategy has committed over £300 million across 28 different housing schemes, providing just over 1,650 homes.
The growth of electric vehicles (EVs) in Asia Pacific is an opportunity for asset owners, says CBRE.
EV sales in the region have been growing and last year APAC accounted for two-thirds of global EV sales. CBRE’s latest report suggests the number of EV chargers around the region will grow to 10 million by 2030, from 2 million and that landlords have the opportunity to enhance their assets with EV charging installations.
Chargers are becoming more common in shopping malls, as customers charge their vehicles while shopping. For industrial and logistics facilities, there is strong demand for direct current fast chargers as occupiers want more charging points for electrified fleets. Meanwhile Australia, India, Japan, and Singapore plan regulations which will require installation of charging points in new office buildings.
Landlords could partner with or invest in charging point operators as well as building their own infrastructure, CBRE suggested.
“From retail malls and office complexes to industrial warehouses, EV charging infrastructure is fast becoming the norm across Asia Pacific as landlords and occupiers gear up for the electric mobility era,” said Sidharth Dhawan, regional head of alternatives - automotive & flex, Asia Pacific for CBRE.
“Planning for EV charging is a complex process. Property owners and investors need to consider potential challenges when installing EV chargers, such as the long payback periods, and short lifecycle of the charging systems,” said Dr Henry Chin, global head of investor thought leadership & head of research, Asia Pacific for CBRE.
Moving to sustainable construction could help substantially reduce global carbon emissions from the built environment, a new report from the International Finance Corporation claims.
The report, Building Green: Sustainable Construction in Emerging Markets, argues that green construction could reduce the emissions due to the “construction value chain”, which includes the construction and operation of buildings as well as production of materials such as steel and cement, by around 23% by 2035, compared with 2035 emissions if nothing is done. Emerging markets would account for about 55% of this projected reduction.
The IFC estimates that continuing with current practice will lead to a 13% hike in emissions from the sector by 2035, from 2022. Moving to green construction methods and materials on the other hand, will cut emissions by 13% from today’s levels.
The construction and operation of buildings and the manufacture of materials such as cement and steel account for approximately 40% of global energy and industrial CO2 emissions. A large share of these emissions is generated in emerging markets, where growing populations and rising wealth drives new construction. Today, these markets often rely on more carbon-intensive methods and materials.
Markets need to introduce green construction practices, materials, and technologies, such as energy-efficient building codes and standards, greening government buildings and procurement, and carbon pricing policies, among other measures.
The cost of this transformation will be $3.5 trillion globally by 2035, $1.5 trillion of which will fall on emerging markets over the next decade, the report says.
"The green construction revolution is picking up speed," said IFC managing director Makhtar Diop. "With the right enabling measures, we could see a surge of private sector financing that will capitalize on the enormous opportunity and huge necessity to transition to sustainable construction in emerging markets."
For building operations, which account for half of all construction-related emissions, renewable energies and new materials such as reflective painting for rooftops and film coating for windows can reduce emissions significantly and generate significant cost savings over time, the report says.
For new buildings, greener materials, energy-efficient and resilient designs, rainwater collection and district cooling represent “attractive options”. For construction materials, improving energy efficiency, and switching to greener processes, raw materials, and non-fossil fuels can also significantly reduce carbon emissions.
The IFC calls for policymakers “to take decisive steps toward establishing the appropriate business, policy, and regulatory frameworks that will facilitate the green construction transition”.
Learn more about the report here.
Feldberg Capital plans to ramp up its sustainable real estate investing after acquiring a UK firm.
The German investment manager this week announced the acquisition of UK firm Brunswick Property Partners, a specialist in sustainable real estate projects.
Brunswick’s AKOYA venture invests in the sustainable refurbishment of London workplaces (such as Power Road Studios, Chiswick, pictured above) in partnership with a sovereign wealth fund.
Feldberg CEO Rodney Bysh said: “We will undertake sustainable real estate developments throughout Western Europe, adhering to ESG principles and delivering value to both users and investors.”
The expanded company will invest in projects with positive environmental and social impact in Germany, the UK and Benelux.
Brunswick founding partner David Turner, now head of investment at Feldberg, said: “The acquisition by Feldberg provides us with the opportunity to apply our expertise to a broader geographical area. Together, we aim to develop the strengthened Feldberg platform into a leading impact-oriented investor in Europe, with the possibility of acquiring additional European asset managers.”
