Restricting urban biomass: A chance to improve city air quality

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Reducing the volume of emissions for real estate activities and subsequently improving air quality is something EVORA Global supports clients in committing to. Often, this involves changing the way factors such as energy and heat consumption are managed. Switching from traditional fossil fuel to cleaner means is a great way to start, however, alternative means of heating still need to be carefully considered in terms of the overall impacts tied to them. 

Biomass systems are an example of an alternative heating source requiring such attention, due to implications for air quality from what they emit. In this blog we explore the potential issues with biomass and what the alternatives are for asset owners looking to move towards renewable heat. 

UK non-domestic renewable heat

The topic of renewable heat has been rising up the agenda as a key part of UK decarbonisation and net zero targets. According to BEIS it is estimated that a third of energy consumption in the UK is from heating, with  a substantial portion of this stemming from fossil fuel sources. 

Traditionally heating has been sourced predominantly from gas (~78%) in the non-domestic space, with only a small proportion from electricity (~8%) and even less from alternative sources (~6%) according to an Imperial College London and Vivid Economics analysis in 2018. As a result, to advance decarbonisation efforts, subsidy schemes such as the Renewable Heat Incentive (RHI) have been introduced. 

The Non-domestic RHI serves organisations that use alternative heating, incentivising the switch by paying generators for generated heat. In this way, renewable heating systems can be paid for in the long term, due to bill savings and cash flow from set tariffs lasting 20 years. Biomass, organic matter used for fuel, has been the most popular alternative, leading the way in terms of the RHI’s contribution to energy system decarbonisation. In fact, as of the end of August 2019, biomass accounted for 16,776 accredited systems across GB, with a capacity of approximately 4.1GW. This represents around 85% of the total number and generating capacity under the non-domestic scheme as shown in Figure One.

Figure 1 – Proportion of alternative heating installations by number and installed capacity (MW) across GB under the non-domestic RHI. 
Source: BEIS – RHI Monthly Official Statistics Table August 2019

Biomass is a carbon neutral fuel as carbon emitted is offset by that absorbed during the growth of the fuel (assuming that a sustainable supply chain is created with a continuous carbon sink and replenishment strategy in place). When compared to other fuelled boilers in Figure 2, data from the UK Houses of Parliament in 2016 suggests that the direct emitted carbon from biomass is lower than other conventional systems. This builds a strong case for using it in heat intensive settings.

Figure 2 – Average emitted carbon from conventional boilers of different fuel types
Source: UK Houses of Parliament 2016

Issues with air pollution

However, biomass has come under scrutiny due to other emissions which result from the combustion of the wood pellet fuel. Fine particulate matter (PM 2.5), ammonia (NH3), nitrogen oxides (NOX), sulphur dioxides (SO2) and other harmful substances have been found in high volumes on average from biomass systems. 

PM 2.5 is an air pollutant that is a major concern for people’s health and wellbeing due to reducing the quality of the air we breathe, causing respiratory difficulties and affecting lung function in the long term. This is primarily from the particulates themselves, however, PM 2.5 can act as a sink for other toxic substances which are produced from transport and industry which can also be drawn into the lungs. Therefore, it is of interest that the volume of PM 2.5 emissions is reduced in urban areas, due to the general proximity of the public to sources of emissions, as well as the relative density of pollution in these regions and other toxins that can be mixed in.

Data from EMEP/EEA air pollutant emission inventory guidebook 2016 illustrates the issue that biomass presents in Figure 3 below, with PM 2.5 emissions being the second highest of the comparative boiler fuels. When these systems are concentrated in an urban area, the issue is only exacerbated.

Figure 3 – Average PM 2.5 emissions from standard boilers of different fuel sources (*electricity does not factor source combustion)
Source: EMEP/EEA air pollutant emission inventory guidebook 2016

A BEIS consultation – restricting urban biomass

Due to issues arising from the continued rise in popularity around biomass and potential to impact air quality, Government outlined in an October 2018 consultation – Renewable Heat Incentive: Biomass Combustion in Urban Areas – the potential to restrict biomass facilities in urban areas. In effect, this will remove the financial incentive for all new biomass installations including combined heat and power (CHP). It has been a year since this consultation was introduced and Government has yet to provide a public response, however it is be speculated that the commitment to restrict urban biomass will follow through, as the Clean Air Strategy 2019 published in January 2019 reiterated the intention to do so.

These restrictions are aimed at steering potential installers of RHI systems away from biomass toward different measures, namely, those with a zero PM 2.5 emission status, as well as energy efficiency measures. As a result, BEIS suggest that the potential net present value of banning urban biomass from January 2019 could be as much as £89mn, with £23mn sourced from air quality impact savings alone due to lower social resource costs. Furthermore, carbon saving of 0.6MtCO2e per annum could also be achieved if other RHI technologies are deployed instead such as heat pumps and solar thermal.

Alternatives for asset owners to consider

Despite heating systems being a staple in all buildings, the reliance on them is still up for debate. It can be considered that in a temperate region like the UK, the need for external heating systems providing heat to buildings is unnecessary, especially in new builds where most new installations are likely to be targeted. In the case of biomass systems, they may not even need to be considered if energy efficient measures can be designed into a construction in the first instance. Furthermore, when looking at older structures energy efficiency and heat dependence can be improved through retrofitting. 

New build thermal efficiencies are expected to increase in the next decade or so, with the tightening of Part L Building Regulations and promotion of better standards such as Passivhaus including improved insulation, reduced air flow and intelligent design to take advantage of solar thermal energy. This could, in the longer term, negate the need for external heating completely, biomass or otherwise as room temperatures are maintained through the day. Therefore, alternative heating arrangements can be put in place, these being smaller and possibly modular RHI accredited systems which can adapt to a growing company throughout the year. This would promote flexibility, energy savings and reduced emissions overall.

…alternative heating arrangements can be put in place, these being smaller and possibly modular RHI accredited systems which can adapt to a growing company throughout the year. This would promote flexibility, energy savings and reduced emissions overall.

However, for existing buildings, which make up most of the real estate stock, external heating will still be required regardless of energy efficiency measures put in place. But real estate within urban regions can still tap into the benefits of renewable heat while avoiding localised air pollution by investing in other generator types. Air source, ground source and water source heat pumps, solar thermal arrays and geothermal installations are RHI accredited systems that do not combust material and therefore have zero PM 2.5 or carbon emissions as a result. 

Utilising these technologies therefore help investors to contribute to sustainability standards, improve health and wellbeing overall and act as an alternative to sometimes expensive energy efficiency retrofitting as well as receiving subsidy for their contribution. 

In summary, though biomass is a good alternative to carbon emitting fossil fuel boilers, in the urban environment emissions of PM 2.5 are problematic and undesired. As a result of the BEIS consultation, newly installed urban biomass is likely to lose subsidy. However, there are alternatives in place which can keep buildings warm but will help to improve air quality, through either complete replacement of biomass systems, or by using intelligent design to negate the need for large external heating in the first place. 

For more information surrounding urban RHI systems or energy efficiency measures, please get in contact with the team. 

BIM:SAM solves riddle of high energy bills in Manchester building

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EVORA EDGE’s innovative BIM:SAM approach (building information modelling for strategic asset management)has helped reduce gas spend by 21% in a building, resulting in savings of more than £20,000 per year.

It has also opened up the potential to achieve a ‘design for performance’ approach relatively quickly and cost-effectively across portfolios of buildings using existing EPC models.

What is BIM:SAM and ‘designing for performance’

BIM:SAM is a decision making tool that helps avoid expensive and time consuming mistakes when managing large and complex buildings.

It starts with a sophisticated computer simulation of a building that reflects its real-world usage and operation. This digital model is then used to test out future scenarios such as extreme weather conditions or different energy management options.

EVORA EDGE’s approach is highly unusual in the UK, where modelling is done only to ensure compliance (such as for energy performance certificates), rather than to demonstrate the real-world operation of a building.

However, it is more common in Australia through the NABERS scheme and is now being championed by the Better Buildings Partnership in its ‘design for performance’ project, currently being tested in the UK.

EVORA EDGE was asked to investigate the high energy spend in a modern office block building in the centre of Manchester. The building had been difficult to benchmark because of its unusual heating, ventilation and air-conditioning system (HVAC) which was described as a ‘ground source heat pump’ in the site’s technical literature. However, the client reasonably expected efficiency savings with this type of installation and was confused as to why this was not happening.

There did not appear to be any obvious fault with the system so EVORA EDGE decided to build a dynamic simulation model (DSM) of the building to try and pinpoint any discrepancies.

There was no time nor the budget to create a DSM from scratch so instead, the EDGE team looked to see if the simple SBEM model, created by another company for energy performance certification, could be converted into a DSM.

This is very rarely done. EPC models are designed to achieve legislative compliance and often contain fundamental gaps compared to the real-world use of a building.

The conversion process was challenging and required an in depth understanding of the modelling software as well as extensive mechanical and electrical engineering knowledge to match it to what was happening on the ground.

However, once done, the DSM model was able to highlight a number of inconsistencies in the data which helped target the on-site investigations.

These revealed that the BMS had been set up incorrectly and was not reflecting the operation of the closed ground water loop system and condenser water circuits.

The solution was remarkably simple and required just a few adjustments to the BMS system.

As a result, there has already been an 8% decrease in costs and a saving of £21,579.70. This equates to a 21% reduction in overall kWh over the comparative period and more than 100 tonnes of CO2 saved.

But what is really exciting is that, although difficult, it is possible for a simple EPC model to be used to develop a highly accurate, digital model of an existing building which can be put to a variety of uses.

For example, the DSM model in this building has already been used again to support a photovoltaic (PV) study. It confirmed that installing PV solar panels would reap an estimated 6% return on investment before the application of predicted energy price inflation. As a result, a 50 kWp PV system has now been installed – further adding to the already impressive sustainable credentials of this building.

The case demonstrates that BIM:SAM is a powerful and flexible tool for asset managers both in day-to-day decision-making as well as for longer-term planning.

If you’d like to know more about EVORA EDGE’s unique BIM:SAM offer please get in touch with Andrew Cooper or Neil Dady on info@evoraedge.com or phone on +44 (0)1743 341903

Chillers and record breaking heat

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It seems appropriate that EVORA EDGE spent the hottest day of the year so far (the hottest day on record in some parts of the country) co-ordinating the replacement of a chiller on the roof of a multi-storey office in Birmingham.

Chillers are guaranteed to cause facilities managers problems during heatwaves. This is because they are complex pieces of equipment which are difficult to maintain properly, expensive to replace and run and, unlike heating, usually only needed for a small amount of time each year in the UK. The temptation is always to push chillers down the priority list in any planned preventative maintenance schedule.

Yet in those weeks when the mercury soars, chillers become the only piece of equipment in a building that matters. If they are old, or poorly maintained, they will not cope with such sudden spikes in temperatures as we saw last week.

It is not unheard of for large office buildings to have to be evacuated because chillers have buckled under the pressure when temperatures hit 30°C. Such incidents are not popular amongst tenants.

In the building in Birmingham, the air-cooled chiller had failed repeatedly over the course of the year.

The decision to replace it had already been made but it takes months to co-ordinate chiller replacements. It requires the preparation of detailed specifications, designs and the running of tender processes. It also needs careful project management to ensure equipment delivery times, permissions and road closures for crane lifts are all co-ordinated so they seamlessly fit together and keep disruption to a minimum. Schedules cannot be changed to fit weather forecasts.

EVORA EDGE’s Operations Director, Neil Dady explains: “Although we still had one operational chiller serving the building we knew that any high temperatures would cause problems and potential failures in the air-conditioning.

“The replacement was scheduled for July. As we watched the temperature soaring in mid-July the project team had to swiftly come up with a contingency plan. We provided temporary cooling and used the fresh air handling units to deliver cooler air overnight while extending plant operating times.”

The pressure was on the appointed contractor S&G Air Conditioning Contracts to ensure the replacement did not overrun and the new chiller was able to be commissioned swiftly.

In the end it all worked like clockwork and the new chiller was quickly in operation. The facilities manager and all those working inside the building can now watch future summer weather forecasts with calm equanimity.

Do heat waves cause problems in your building? Contact EVORA EDGE for detailed audits and risk assessments of equipment as well as project management of chiller replacements on info@evoraedge.com or phone on +44 (0)1743 341903.

Solar power: still a viable option following the closure of the feed-in tariff

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There have been widespread predictions that green energy technologies, such as solar and wind power, would not be able to survive the government’s closure of the feed-in tariff (FiT) scheme for small scale renewables at the end of March this year.

For many suppliers, this has certainly been the case. The number of registered solar installers, which blossomed to 6500 by 2014, is now less than 1000 in May 2019 – equating to just a few hundred companies.

But for those who have managed to hang in there, the signs are that this tariff-free future could, in fact, herald a new golden age of solar photo-voltaics (PV) without the hindrance of continual FiT deadlines.

The great gamble by the government seems to have paid off and the material prices for PV have now reduced significantly to the point where, so long as the generated solar power is used within the building where the system is installed, small/medium scale commercial solar PV systems do not need a feed-in tariff to be viable.

Four years ago the cost of a 50kw PV system was in the region of £65,000. The same system, including design, structural engineers report, mechanical and electrical (M&E) support and the installation itself, is now circa £40,000. Whether the building owner consumes all of that power themselves or the same is sold to the tenant on a competitive power purchase agreement of 12p per kWh, the investment rate of return (IRR) can be expected in the region of +12%. That does not take into consideration the annual increases to the cost of electricity which would boost this return still further.

Even if the system owner opts for a full life-time operating and maintenance package, the IRR is still in the region of 8%, which provides a very healthy return on investment, given system lifetimes are well over 35 years currently.

On top of this, PV still delivers on its initial promise of reducing carbon dioxide, with a 50kw system saving more than 20 tonnes of carbon emissions per year compared to existing electrical consumption.

With the government signalling that climate change targets are likely to get even more challenging, commercial building owners can once again look at PV as a well proven, low impact method of generating green energy, as well as a very profitable investment.

EVORA EDGE has experience in installing and managing PV systems in commercial buildings. For more information have a look at our case study where we identified suitable sites, negotiated with occupiers and managed the installation of systems for a large investment fund.

Contact Andrew Cooper on acooper@evoraglobal.com or 01743 341 903

Addressing Environmental Risk in Shopping Centres

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Environmental impact is not the first thing that comes to mind when we pop down to the local shopping centre. However, going behind the scenes offers a very different viewpoint.

Many impacts need to be considered and managed including energy and water usage, waste management, potential water discharges (think car washes), noise, air conditioning, climate change resilience, flood risk, EPCs and Minimum Energy Efficiency Standard (MEES) obligations. I could go on and I haven’t even mentioned social, economic or health and wellbeing factors also at play. Left unmanaged, these issues can cause harm to the environment, waste money and even impact on asset values. This blog explores the benefits of implementing an Environmental Management System (EMS) to a shopping centre.

To provide a bit of background, I have worked at EVORA for 18 months now.  My role is varied and late last year I successfully completed my first ISO 14001 EMS implementation project. I thought I had better get my ideas down and quickly.

Proactive

Environmental issues are regularly dealt with on an ad hoc basis. Understanding risks and legal requirements is key in mitigating potential incidents and pollution events – otherwise they may only be identified after an incident has occurred. An EMS provides a proactive approach to managing risks as it provides a mechanism and structure to identify, understand and manage the site-specific issues appropriately.

As an example, a site I visited recently benefited from an interceptor, however, it had not been inspected for several years (due to access issues) and maintenance records did not exist. As a result, if there had been a significant spillage, the interceptor may have failed and resulted in a pollution event occurring in the local environment. An EMS, if implemented and used correctly, identifies risk, potential legal requirements and, in this case, would have ensured a regime of maintenance was implemented and sustained.

It could be argued that such an approach can be developed without an EMS – true – but in this case it was not.  Our project used EMS implementation to address this issue.

Legal Compliance

The environmental regulatory landscape can be a minefield for those unfamiliar with the subject. This can result in difficulties in maintaining legal compliance (you cannot comply with legislation if you don’t know what you have to do). Having worked for EVORA for the past 18 months, I have spent a lot of my time building up an understanding of the nuances and intricacies of environmental legislation.  Spoiler alert – it is never as straightforward as it seems! There are many different areas of environmental legislation applicable to shopping centres (and the wider arena of properties in general).

Examples include:

  • Ensuring that waste is stored correctly and disposed of appropriately, if treated on-site, waste exemptions must be considered
  • Maintaining the availability of accurate waste documentation
  • Ensuring EPCs are in place where applicable and compliant with MEES requirements
  • Arranging boiler servicing and F-gas leak testing to be undertaken in line with defined timescales by appropriately competent people
  • Maintaining the integrity of on-site fuel storage and associated systems such as interceptors
  • Bird control (one of the shopping centres we support has a significant seagull issue!)

An EMS can help ensure legislative requirements are understood and implemented.

 A Structured Approach

At first glance it can be difficult to understand the widespread benefits of an EMS. On my first EMS project I asked the question ‘Why are they were pushing ahead with ISO14001?’

On reflection, I think there are multiple reasons:

  • Structured control of environmental risks
  • Identification of improvement opportunities that reduce operating costs (energy savings)
  • Ability to demonstrate environmental credentials to the outside world.

An EMS provides a defined methodology for risk management. It can be implemented on a single site or across an entire business. Furthermore it can integrate with other systems (think health and safety or quality). The setting of objectives helps to manage risks (i.e. energy use) and improve performance often resulting in reduced costs. Progress is monitored in order to determine if objectives are on course to be achieved. This all drives continual improvement, which in turn ensures shopping centres with effective environmental management systems become more resilient to environmental risk and helps in future proofing the asset.

To Certify or Not to Certify

ISO 14001 is the international standard for environmental management. An EMS can be certified against this standard. This is not essential, however, it can be useful for an external party to certify the EMS as it can provide a fresh pair of eyes and helps to confirm that the system is working effectively. A certified ISO:14001 EMS provides external proof and strengthens reputation, provides good publicity for the business, improves GRESB scoring (where relevant) and is often perceived favourably by tenants.

Environmental Management Systems – Worth Far More than the paper they are written on!

If you want to find out more about Environmental Management Systems and wider sustainability strategies in shopping centres contact EVORA today.

Easy energy savings: Closing Up for Christmas

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Easy energy savings: Tips & Tricks to minimise your energy consumption over the Winter break.

It’s that time of year again: the old Christmas jumper pulled from the depths of your drawers, Secret Santa gifts exchanged, every last drop of mulled wine in a three-mile radius consumed, and now Christmas is just around the corner and the office is closing up.

With all the occupants out and about, why not give your building a break too?

With all the occupants out and about, why not give your building a break too? Closing up for Christmas should be more than just locking the doors and turning on your out of office – the holidays present an ideal opportunity to shut down your building systems and avoid unnecessary wear & tear and energy usage.

These are our top tips for site teams on closing up the office for Christmas:

  • Shut down central plant– The 25thof December and the 1stof January are national holidays across Europe, so as a minimum plant need not run on these days. Many offices will shut on other days as well or even throughout the whole period so be sure to make the most of this. The majority of BMS front-end systems will allow you to set exceptions for specific days so that everything returns to the normal setup in the new year.
  • Turn off / turn down radiators– Any manually-controlled radiators around the building will continue to pump out heat unless you turn down the thermostats or switch off the LTHW system centrally using the BMS.
  • Check frost protection settings– Dealing with frost damage is no way to kick off the new year. Therefore, make it your early resolution to ensure that all internal temperature (stage 2) frost protection settings are adequate. EVORA recommends these be set to 10ºC.
  • Review tenant control panels– We all know what an office is like… Sarah’s too hot, Jonny’s too cold, and no one knows why Phil keeps opening the window. If you leave tenant HVAC control panels unchecked for too long, this battle of wills can quickly make a mess of the settings. As the office empties over the holidays this can be an ideal moment for the site team to step in and do a review, whilst minimising disturbance for the tenants.
  • Reduce fresh air delivery– Even if the office is open chances are occupancy is reduced, and with fewer people around CO2 levels in your building will increase much more slowly. If you’ve got a demand-driven system with CO2 sensors on the extract ducts then, nice work, your BMS is sorting it for you. If not, then consider monitoring building occupancy and internal air quality, then reducing the fresh air delivery rate and/or Air Handling Unit operating hours where possible based on this information. This will have the bonus effect of reducing heating demand, as less cold winter air will be pulled in from outside.
  • Finally, unplug the Christmas lights– I know you’re proud of your nicely decorated tree but come on now, nobody’s here to see it, just switch the lights off!

Happy Holidays from everyone at EVORA!

Energy Savings Opportunity Scheme (ESOS) – a burden or an opportunity?

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Regulatory reporting can often feel a burden, and in areas which are more specialist, such as energy and carbon reporting, it can be a daunting experience.

Energy and carbon reporting regulations have principally been introduced to highlight the materiality of the impacts and provide visibility of the opportunities to deliver both energy and cost savings.

The reality is that many organisations only want to be compliant and it is only the few who see the opportunity to push forward opportunities and create a competitive advantage.

A good example of this is the Energy Savings Opportunity Scheme (ESOS).

ESOS (Article 8 in Europe) is upon us again in the guise of Phase 2 and will impact large undertakings both in the UK and Europe, requiring them, in simple terms, to measure 12 months of energy across their organisation and identify energy efficiency initiatives through energy audits. For more information on meeting compliance read our ESOS compliance guide.

ESOS has been developed to help organisations understand their total energy use and identify opportunities to deliver energy and cost savings, which is presented to senior management. It is hoped by the government that ‘low hanging fruit’ with pay backs of less than a year will be a no brainer to organisations to implement.

Although the deadline is the 5thDecember 2019, there are advantages in kicking off early with the energy audits, firstly to have a project plan in place to ensure you meet the deadline and secondly to identify cost-effective energy efficiency opportunities, which could provide immediate benefit to the financial bottom line. In Phase One, EVORA identified £2.8M of low cost energy savings for its clients.

Do you see ESOS as a cost to your business or an investment?

ESOS only requires you to identify the opportunities and ironically many organisations did not implement the initiatives found in Phase One. This turns ESOS regulation into a cost rather than an investment – a significant missed opportunity.

An example of the quick win opportunities is highlighted by work EVORA delivered in collaboration with a property management company to deliver an energy efficiency programme utilising EVORA’s energy management software, SIERA. The graph below displays the weekly energy profile at the office building (110 Queen Street in Glasgow) before (light blue line) and after interventions (dark blue line) were brought about by the improvement programme.

Significant improvements in the energy profile can be seen, especially at the weekend, which has delivered savings of 30% (greater than £30,000 actual savings in the year) without any capital expenditure. This was achieved despite increased occupancy at the property throughout the year and payback was less than three months.

For more information on how we delivered these savings read the full case study here.

This is certainly not the exception and we have worked with an array of sectors including power generation, real estate, retail and hotel & leisure to optimise energy efficiency, often achieving surprising results.

If you’d to learn more about how we can support you with your ESOS regulation and turn a compliance cost into a long term investment, contact us.

Do your buildings meet the Minimum Energy Efficiency Standards (MEES)?

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Are your assets at risk as a result of the Minimum Energy Efficiency Standards (MEES) regulations which came into force on the 1st of April 2018?

In a previous blog post titled “MEES regulations: How they will impact flexible workspace from April 2018” written by my colleague Russ Avery, he gave a 10-point strategy on how you can manage MEES risks.

The regulation means that landlords cannot let, extend or renew a lease for F and G rated properties unless an exemption applies. One such (temporary) exemption is that the EPC rating cannot be improved through measures that pay for themselves within a 7-year period.

E rated properties may still be at risk from MEES regulations!

Landlords and their professional advisors should also be aware that there was a fundamental change to the EPC calculation methodology effective April 2011.

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This means that assets which had their EPCs prepared prior to this date could be at risk even if they were E rated. We can identify these assets after reviewing your existing EPC’s and help establish improvement programmes to improve your rating.

What implications will this regulation have on your assets?

MEES regulations will need to be factored into the day-to-day asset management of commercial real estate. We consider below some implications of the regulations.

Transactional value: We have first-hand evidence as a company that poor EPC ratings affect transactional values. We know of transactions where hundreds of thousands of pounds have been ‘chipped’ off the agreed purchase price once the due diligence processes established incorrect EPC certificates were in place.

Valuation: Both yields estimated rental values (ERVs) are ‘at risk’ because of MEES. Research indicates that the effect of disregards at a rent review and under a 1954 Act lease renewal on ERVs could impact capital values by more than the cost of relevant improvements.

There is an assumption by some professionals in the market that MEES will hit secondary and tertiary assets more than prime real estate. This may be incorrect due to the way in which commercial property is typically valued. In its simplest form, capital values are determined largely by the rental value of the premises, either actual or potential. A valuer looks at this income and applies an appropriate ‘all risks yield’ to reflect the security and term of income, and any potential for future growth. This is represented by the simple formula: NI x YP = CV, where NI in net income, YP is years purchase, and CV is capital value.

The cost of the installation (or disregard) of building services is reasonably uniform subject to locational adjustment factors. Technologically speaking, a heat pump installed in London will be the same as a heat pump installed in Hull, and cost is affected by labour rather than the technology itself. A prime yield might be 5%, where as a secondary yield might be 10%. A £1.00 reduction in rental value as a result of MEES will therefore affect capital values by £20.00 on the prime investment (100/5 = 20 YP) and by £10.00 on the secondary investment (100/10 = 10 YP).

Dilapidations: The effect of Section 18 Valuations and supersession generally have the potential to render tenant repairs useless because of MEES. If precedent is established for this, then the dilapidations market could be significantly impacted by MEES. We see this as a potentially market disruptive issue for property. Read more about dilapidations here.

How to manage MEES (our previous 10 step guide)

  1. Review how you store your data
  2. Identify any gaps in the data and any assets at risk
  3. Consider the use of software, such as SIERA
  4. Use CIBSE accredited assessors
  5. Ask your assessor to review the existing EPC for accuracy
  6. If you need a new EPC, ask for an indicative certificate
  7. Review point 6 in the context of the lease
  8. Consider ways to recapture capital costs through energy savings
  9. Retain future access to the energy model used to prepare the EPC
  10. Review how operational performance can be monitored – and even linked to the EPC model

EVORA EDGE can support you in all cases as we employ competent CIBSE qualified level 5 EPC assessors.

Our expertise

EVORA can identify and manage MEES derived risk by developing an asset management strategy at the fund and portfolio levels.

Our technical engineering division EVORA EDGE is experienced in using our revolutionary BIM:SAM– Building information modelling for Strategic asset management to manage MEES risks, engineering and energy efficiency, resource efficiency and capital cost planning.

Building Information modelling (BIM) can be used for high-level MEES risk assessments and act as a ‘digital passport’ for your building, recording data and information of the building and its services.

The BIM can be integrated into our SIERA software to create a powerful monitoring and targeting (M&T) toolset.

BIM: SAM merges real intelligence and innovation with strategic asset management.

“By using a dynamic BIM model, alongside monitoring and targeting through our SIERA software, we can bring real intelligence and innovation within the strategic asset management approach.”

Neil Dady, Director, EVORA EDGE

To ensure your buildings remain lettable after the 1st of April 2018. Please don’t hesitate to get in touch with our experts.

Download our BIM: SAM brochure for all the information in a handy PDF and see our BIM:SAM approach in action.

Why sustainability cannot be ignored by the real estate industry

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A key motivation when we started this business was for sustainability to be seen and accepted as a valuable asset management tool by the property industry. Seven years on, has our goal been achieved? Read on!

What is sustainability in Real Estate?

Sustainability can mean many different things to many different people so to keep it simple, I see sustainability in Real Estate as delivering enduring value. For the real estate industry, ultimately, for a building to be sustainable it needs to be occupied both now and for the foreseeable future, delivering an acceptable return to the investors.

Delivering value comes down to the key drivers of occupancy, rent, lease length and covenant strength so if a sustainable approach can enhance any of those key elements it will deliver value, in the same way as any other asset management tool. That has been my approach for the last seven years although I hope some of our methodologies have matured!

Sustainability is far more than managing energy, water and waste. Don’t get me wrong, these are important aspects, which can reduce the operating costs of a building and improve its resilience, all of which should be attractive to the occupiers.

Does this deliver quantitative returns?

The answer is not obvious in Europe, although the award-winning study entitled “Decomposing the Value Effects of Sustainable Real Estate Investment: International Evidence” measured the impact of sustainable investment on the value and performance of listed real estate investment firms (REITs) and found that strong sustainability practices are associated with superior investment performance.

[click_to_tweet tweet=”If you ignore sustainability you marginalise your ability to attract the broadest scope of occupiers, potentially those most likely to have the best covenant strength who often also have the strongest CSR credentials” quote=”If you ignore sustainability you marginalise your ability to attract the broadest scope of occupiers, potentially those most likely to have the best covenant strength who often also have the strongest CSR credentials”]

More importantly, if you ignore sustainability you marginalise your ability to attract the broadest scope of occupiers, potentially those most likely to have the best covenant strength who often also have the strongest CSR credentials. We have experienced, on a number of occasions, corporates matching this profile, willing to commit to longer leases for buildings which have excellent green credentials. This is of course not a one size fits all.

What does this mean?

At a regulatory level, in the UK it is now unlawful to let a building if it does not have a minimum EPC energy rating of an E. In addition E rated properties may still be at risk from MEES regulations. This is significant. For the first time we have energy efficiency regulation that impacts rental income and value. It will be interesting to see if this transitions into Europe in the future.

Interestingly though, we have seen greater uptake of sustainability through voluntary reporting than enforced regulation. GRESB, the global sustainability benchmark survey has mobilised the real estate industry over the last few years with 850 portfolios participating in 2017, representing more than USD$3.7 trillion in assets under management. GRESB is investor driven, to assess the environmental, social, governance (ESG) performance of their investment managers, where many see ESG as a fiduciary duty to protect and enhance future value of their investments. It is also interesting to note that research in July 2017 by Dirk Brounen and Maarten van der Spek identified a return premium of 3% between the highest and lowest GRESB scoring participants.

What practically should we be thinking about for the future?

So there appears to be some quantitative correlation to performance if enough research is done. But what practically should we be thinking about for the future?

For me, the three big impacts to plan for will be climatic change, technological advances and a generational shift in behaviour. I’m not going to dwell on climate change but the combination of rapidly advancing technology with a changing work culture will see a move away from honest work for honest pay to meaningful work in a meaningful environment. The advent of health and wellbeing to deliver a ‘meaningful environment’ is already upon us and my instinct tells me this will be the new face of sustainability, which will mobilise the industry far more quickly than just measuring energy.

To speak to a member of the team about how we can support you, please contact us.

PropTech: A Real Estate (R)Evolution

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Back the 1980’s I was co-founder of a software company, which specialised in creating systems for the (then) new generation of PC’s. Myself and my colleagues had learned our programming skills whilst studying for PhDs using massive mainframe computer systems with clunky user interfaces and torturously slow software development cycles. We seized upon the new generation of “Micro Computers” that had emerged in the 1980s and new software tools that let us develop systems far quicker.

We started to develop software for the commercial real estate market, creating a system that allowed agents to match client requirements against a database of available property. We created a centralised service to compile the database of property and distributed it by electronic bulletin board. Fairly rapidly, we had all of the major agents using our system with over 100 clients.

This was before the internet. In short, we had used technology to disrupt an industry, revolutionised the distribution of information, automated manual processes and consolidated effort. I guess these days we would have beards and drink flat whites in some trendy loft studio near Old Street.

30 years ago PropTech was confined to the primal needs of the commercial real estate world, namely managing the process of finding tenants or a suitable property, managing the process of rent and services charge, and valuing the property. And that was about it.

These processes remain core to the PropTech offerings that are currently on the market and over the years they have been augmented by new technologies, but we have not necessarily seen disruptive change. The advent of the Internet in the 90s bought about huge changes in the way that property could be marketed, but, did this really shake the residential and commercial agency markets? New technological developments are bringing new products to the market but will we see further ‘disruption’?

Let’s examine the potential for change.

EVORA Global Proptech in Real Estate

Virtual and augmented reality

This technology certainly has the potential to enhance and quicken the design process, allowing the client to get closer to what their space will could look and feel like. Certainly, this technology will impact the way that architects and designers work with their clients, reducing the cycle time from concept to finished product.

However, in reality, is this tech making an existing process more efficient rather that creating a new model?

Internet of Things (IoT)

IoT has the potential to enhance the way that we monitor and control space. It’s noticeable that some BMS vendors are now rebranding as IoT vendors. Closer control and monitoring will enable more cost efficient and environmentally sustainable use of our workspaces. As suggested this technology is already disrupting the BMS market, causing established vendors to shift their stance as new players start to infiltrate their market with new platforms that allow monitoring and control of workspace use, CO2 levels, basic energy use and focussing on a ‘Wellbeing’ agenda.

IoT has the potential to also produce lots of Big Data, but what does that mean?

Big Data

The potential for Big Data within real estate is enormous. At a micro scale, looking at data from IoT sensors and BMS and meter data and also on a macro scale, analysing value trends etc.

But, as Dan Areley of Duke University said:
Big data is like teenage sex: everyone talks about it, nobody really knows how to do it, everyone thinks everyone else is doing it, so everyone claims they are doing it…

There is the potential for Big Data to extract nuance and understanding from complex systems. In real estate terms, to be able to identify how factors such as weather, occupancy and footfall can impact on cost and environmental impact.

The issue with Big Data is that by its very nature, it is big. So big that conventional Business Intelligence tools cannot really cope with the sheer volumes that are in play and the complexity of the relationships between the data. The potential for disruption through enhanced insight is always possible but, with current tech, unlikely.

But there is hope, in the form of AI/Machine Learning, how would this look for the Real Estate industry?

Artificial Intelligence (AI)/Machine Learning

AI/Machine Learning is the new kid on the analytics block and is the key to unlocking the value of the Big Data that could disrupt many aspects of the real estate world, such as valuations, sustainability, planning and market analysis.

The driver behind AI/Machine Learning is Data Science, a whole different approach to analytics. It is not so much about the evolution of Business Intelligence (BI), but more of a completely new approach, a new species.

[clickToTweet tweet=”Data Science offers the opportunity for discovering new questions to be answered and takes the approach of statistically analysing the data, so that the relationships between the different data types can be articulated as a model.” quote=”Data Science offers the opportunity for discovering new questions to be answered and takes the approach of statistically analysing the data, so that the relationships between the different data types can be articulated as a model.”]

BI is about KPIs, charts and answering questions that we knew – in very crude terms – sorting, grouping, charting and comparing data that exists in regular structures. Data Science offers the opportunity for discovering new questions to be answered and takes the approach of statistically analysing the data, so that the relationships between the different data types can be articulated as a model. As that model becomes refined and perfected that gives us the intriguing possibility of prediction.

DAaaS – Data Analytics As A Service

Data Science isn’t new, it has been around for around 30 years and arguably, has been driven forward more recently by faster processing, high capacity storage. This is now manifesting itself as DAaaS – Data Analytics as a Service. Cloud providers such as Amazon Web Services and Microsoft Azure are offering storage, data handling and modeling tools to provide the possibility of creating predictive analysis opportunities based on our own data. However, these tools require new skills in our teams, Data Scientists to create the models that we need.

So don’t be surprised to see service providers and end users on the real estate market recruiting and training Data Scientists, which will lead to the creation of value from Big Data. This value, in terms of strategic and operations advice will in turn reveal The Big Answers and also The Big Questions.

Blockchain

Whereas Big Data is a fairly easily understood concept, Blockchain causes a few difficulties. Firstly, what is Blockchain and, secondly, how could impact the real estate world and, in particular, the sustainability agenda?

Blockchain originated back in 2008 as a digital ledger that provides a way of encrypting and providing transparency for cryptocurrency transactions. More recently, it being seen as a way of encrypting transactions between parties in such a way as to provide total transparency and auditability. In the real estate world, this could be used to encapsulate lease transactions, rent payments and rent review agreements. If we extend our crystal ball into the sustainability world then we could see Blockchains between utility companies and consumers, providing investment strength data with regards to energy consumption.

EVORA can help you capture your building data with SIERA Sustainability Software. Contact Us for a demo.