Money and the Role of Building Physics Software in the Valuation Chain

Understanding Green Building Economics

SEPTEMBER 2017 – VERSION 1.0

EVORA EDGE’s Key Fund & Asset Management Objectives

Attract investors who are keen on

social/environmental investment

Future-proof assets

Attract and retain occupiers with strong

covenant strengths

Ensure that climate change adaption is

understood and managed

Deliver assets that are productive,

profitable, and resilient to change

EVORA EDGE understands commercial real estate. It’s in our DNA.

Our key objectives are simply to support fund and asset managers to:

ONCE UPON A TIME…..

27 September 2017 3

Green premium or brown discount

Rental value divergence between energy efficient and non-energy efficient offices – The Netherlands

80

85

90

95

100

105

110

115

2006 2007 2008 2009 2010

Green Index Non-green index

Source: The Value of Energy Labels in the European Office MarketNils Kok & Maarten Jennen – May 2011

NB Slides developed by Deloitte LLP

‘Re-phrasing’ the evidence

Rental value divergence between energy efficient and non-energy efficient offices – The Netherlands

Source: The Value of Energy Labels in the European Office MarketNils Kok & Maarten Jennen – May 2011

80

85

90

95

100

105

110

115

2006 2007 2008 2009 2010

Green Index Non-green index

JLL Prime European Rental Index IPD Netherlands Annual Property Index (Office)

Correlation between Energy

Efficiency and Rental Indices

“Generally” Positive

“Generally” Negative

NB Slides developed by Deloitte LLP

Drivers for Green Buildings (EVORA’s experience)

Minimum Energy Efficiency Standards

GRESB

CSR / Policy etc.

Investor sentiment

BREEAM (through CSR and/or Building Regulations)

Impact of all the above on value including:

– Transactional value

– Yield gap

– Rental income (rent reviews, lease renewals etc.)

27 September 2017 6

MEES and commercial property

NEGOTIATING TACTICS

Dilapidations

New Letting

Fitting Out

Management

Periodic

Reviews

Existing Letting

EVORA has FIRST HAND

experience of price

reductions at sale as a

result of EPC ratings

EVORA is aware of

significant sums being

negotiated (down) through

dilapidations claims

EVORA is required to factor

EPC ratings into

performance specifications

by major funds

EVORA has engaged with

arbitrators on the likely

effect of MEES on rent

reviews and lease renewals

All requires a basic

energy model

The better the model the

better the more effective

the asset management

strategy

In summary: in the UK, particularly in England / Wales, it is already virtually impossible for an asset manager to (effectively) manage corporate real estate with a basic energy model (an EPC). This can be used as the starting point for developing a BIM

27 September 2017 8

IMPACT and Life Cycle Assessment (LCA)

27 September 2017 9

What is IMPACT?

It is a specification and database for software developers to

incorporate into their tools to enable consistent Life Cycle

Assessment, but also Life Cycle Costing

IMPACT works by allowing the user to attribute

environmental and cost information to drawn or scheduled

items in a Building Information Model (BIM)

Put simply, IMPACT takes quantity information from the BIM

and multiplies this by environmental impact and/or cost

‘rates’ to produce an overall impact and cost for the whole

(or a selected part) of the design

27 September 2017 10

The Orchard Centre, Didcot, Oxfordshire

http://www.impactwba.com/

http://www.impactwba.com/

EVORA EDGE: Where have we carried out LCA?

Azerbaijan

Moscow

London

Oxfordshire

Gateway Building, Baku White City, Azerbaijan

Working with Encon, JLL, Aecom, Hammerson


:

Hammerson LCA Project

Why did Hammerson undertake an LCA?

Hammerson wants to make significant reductions across

all areas of its carbon footprint and the least well

understood is the embodied carbon of its development

activities.

“Using IMPACT allows us to quickly and consistently assess

the embodied carbon of a project at an early stage to raise

design team awareness and to subsequently inform design

decision making. We potentially see IMPACT being an

integral part of the design process and rolled out across

future projects”.

Richard Quartermaine, Environmental Manager for

Hammerson - CIBSE Journal February 2017


Hammerson LCA Project

Hammerson had previously undertaken an LCA on a

shopping centre in France

To do this it appointed a niche consultancy, the report took a

long time and it cost a lot of money

It identified a significant environmental impact when

compared to operational carbon

Hammerson decided to look for quicker and more cost-

effective methods to undertake LCA

Is interested in the use of BIM

Decided to trial IMPACT to ‘piggy back’ off other members

of the design team and to gain additional BREEAM credits


LCA Findings

The cradle-to-gate impact of The Orchard Centre is in the

region of 883 kg CO2 per m2. This is within an acceptable

range based on the nearest matching RICS benchmarks of

between 750 and 935 kg CO2 per m2 for comparable

buildings

We also found that there is scope to reduce the

measured impact of The Orchard Centre to below the

benchmarks through additional analysis or through the

removal and replacement of the aluminium louvre

enclosure to Block A

The cradle-to-grave impact of the development is in the

region of 1,209.67 kg CO2 per m2, but there are no

recognised benchmarks for us to compare this to

The original design for the proposed foundations was

to be a piling system with piled caps. This has been

replaced with mass filled foundations including strip

foundations. The result of this decision is that the

environmental impact of the development has

increased by approx. 89.67 kg CO2 from 1,120.00 kg

CO2


LCA benefits and costs


BREEAM International: 6 credits can be gained by using IMPACT on a project

BREEAM UK New Construction: 2 Exemplary credits

An initial review by bre suggests that the tool will also satisfy the current

whole-building LCA requirements of LEED

Greater insight on design impacts

And on the small matter of construction costs………….

Source: SPONS Architects and Builders Price Book 2017

IMPACT and Cost Planning


Using IMPACT to help Guildford Borough Council

Using IMPACT to help Guildford Borough Council

Since 2011, Guildford Borough Council (GBC) has had a

requirement in place to reduce carbon dioxide emissions by

10% through the use of Low and Zero Carbon (LZC)

technologies. This is set out in Action 4 of its Sustainable

Design and Construction Supplementary Planning

Document (SPD).

To encourage sustainable growth, GBC set out what the

additional cost would be for a developer if this target was

strengthened to 15% and 20% against a 10% baseline cost.

GBC commissioned EVORA EDGE to provide a report

detailing the typical costs of implementing LZC technologies

that would meet these standards. In doing so, it aims to

support the policies contained in the new Local Plan and in

the existing SPD.

A core part of our work involved the creation of a building

information model (BIM) using IES engineering software -

the Virtual Environment (VE).

Uniquely, EDGE used its BIM:SAM processes to undertake

the project. Building costs were taken from SPONS

Architects & Builders Price Book and SPONS Mechanical &

Electrical Price Book – 2017 editions, and incorporated

within our engineering software.27 September 2017 19

Using IMPACT to support GBC

As a result of our study, GBC has proposed in its consultation documents a reduction in CO2 emissions of 20% to most new developments


Building Information Modelling

for Strategic Asset Management

Placing BIM at the Heart of Strategic Asset Management

BIM PROJECTS

Capital Costs (RICS NRM format)

Life Cycle Costs

Life Cycle Assessment (Resource efficiency)

Planned Preventative Maintenance

Feasibility studies

Minimum Energy

Efficiency Standards

Planning & Building

Regulations

Occupier comfort

modelling

Using IES, IMPACT and our own software SIERA. EVORA is engaged in projects to create calibrated energy models and BIMs for asset management, operational management (planned maintenance etc.), energy management and productivity.

Results to be published in October 2017!


Building physics is now linked to value globally


LEED

BREEAM

NABERS

GRESB……


Get in Touch

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