The Secret to Future-Proofing Your Portfolio

How data can make your buildings more productive, profitable and resilient to change.

Notes from the 2017 GRESB-Siemens Spring Conference

Some colleagues and I attended a fascinating event a few days ago organised by GRESB and Siemens which focused on climate change, the contributions real estate makes to emissions, and our ability to make significant changes by shifting the paradigm.
One of the things that struck me was the bi-polar tone of the discussions at the event. Speakers and attendees would swing from dark, pessimistic views of the status quo to wildly enthusiastic proclamations about some of the amazing latest trends and technologies that are coming out. And you know what? They’re right. The current status quo is unacceptable, but sustainability and environmental responsibility is slowly becoming a more mainstream part of the decision-making process. But in an industry that can be resistant to change we must justify the push for sustainability within real estate with cold hard data. Without this we have no chance of bringing about the change we all know is necessary.
If the industry is not pushing to engage all stakeholders, then we will never make the changes we want to see. Sustainability is often spoken about by sustainability professionals in a ‘Sustainability Silo’ and we spend our time shouting at ourselves in our own echo chambers. As much as the rest of the market needs to recognise the importance of sustainability in terms of reducing risk and making assets more productive, as sustainability practitioners we need to get out there and prove our points with data.
Reliable data is clearly still an issue as 65% of the GRESB-Siemens Spring Conference attendees highlighted that they wanted more data to drive the sustainability agenda.
Getting data these days is not a problem. Every year we produce and collect more data than has existed in the entire history of humankind before. But with so much data, how do you make sense of it all? ‘Dark Data’ is one of the challenges that we’re facing. We have become so inundated with information that we’re unable to make informed decisions. Data is knowledge, and knowledge is power, but only if you understand it. This is why sustainability data management systems are so valuable to the real estate sector.
To make buildings more efficient and productive, as a first step, you don’t need to invest tens or hundreds of thousands of pounds in new LED lighting, fancy new lifts or filtration systems (although they do help of course). No, firstly you need to use the data you’re already creating and use it to get the basics right. At EVORA, we have developed our own sustainability data management software called SIERA, which simplifies the process and helps make sense of data in the operational sphere to support strategic decision making.
Through our suite of SIERA managed solutions, we have been able to help identify efficiencies of 10-15% per annum for our clients, without any capex costs. Not only is this a long-term benefit for the asset, it is also a competitive selling point in the short term.
Within the CRE sector, there is disagreement about whether ‘green premiums’ actually exist. Will a tenant pay more for a more sustainable building? Maybe, maybe not. But I am confident that tenants will be interested in a ‘green discount’. If an asset manager can make their building more efficient and thereby reduce the service charge and operating costs for their tenants, this will make the building more attractive. At EVORA, we have been able to achieve £0.54 per square foot reductions in service charge through no-cost actions using data as the primary enabler. Let’s say a tenant based in Office A has 10,000 square feet of space, that is a saving of £5,400 p/a. The asset manager would likely not have been able to achieve these savings without the data to identify the points of improvement, which demonstrates why it is so important to have an automated software like SIERA within a property to make it more competitive.

One could argue that the cost of energy today is so low that this isn’t a priority, but the point of sustainability is not about the short term. Harnessing the power of the data that is created in a property and being able to easily translate and utilise that data to make high ROI improvements is about future-proofing investments.
Fund managers have a fiduciary duty to manage assets in the most responsible way possible and, by ignoring the raw data that their properties are already producing, they’re missing a huge opportunity.
It was interesting to hear the honest answer from a fund manager at the GRESB-Siemens conference, who made it quite plain that he doesn’t prioritise sustainability when evaluating new acquisitions, but he recognises the increasing importance of sustainability in transactions. Although fund managers are perhaps not seeing the short-term value in integrating sustainability within organisations, it is becoming increasingly clear that it now forms an essential part of mitigating risk for the medium to long term.
By implementing sustainability data management systems, asset or fund managers can utilise the existing data in their properties to make them more attractive for tenants in the short term and to make them more resilient to environmental and economic shocks in the long term. However, they can only do this if the dark data they produce is brought into the light by systems like SIERA.
Fund managers are now able to use this new data by comparing their performance against the rest of the market through GRESB benchmarking. This information allows them to understand their own performance and identify points of improvement, but also benchmark themselves against their competitors.
This is becoming increasingly important as investors and occupiers put a stronger emphasis on the sustainability and environmental performance of buildings.
As human beings, we have a responsibility to take care of the world we live in and it is changing at a faster pace than ever before. With the signing of the Paris Agreement in 2015 I believe the world recognised its ‘tobacco moment’ and the impact that real estate has on the emissions we produce. Unfortunately, some of the market is still stuck in its ‘smoker’s dilemma’ where they don’t see any noticeable change by not optimising their existing real estate infrastructure, but rest assured those in the market who have recognised and acted on the risk of unsustainable properties will be more competitive and resilient to shocks to the market in the near or long-term future.
The only constant is change and we live in a world of change on steroids. Those organisations who wait on government legislation or markets to force their hands will be left behind.
The future belongs to the brave, and data is knowledge.
This article is written by Jeroen Houtzager, Business Development Manager.