News - Midlands
The Green Room
Silently, almost without the world noticing, an arms race is escalating in our streets.
Over the past few months developers have started to try to outdo each other in a race to create the most sustainable office spaces they can afford.
It is partly out of a need to keep up with government and European green regulations, but mainly just to simply stay in the game as occupiers - particularly big corporations and government agencies - demand ever more sustainability in their office space.
David Smeeton, head of office at agent Colliers CRE, says: "It's true.
There is a race to create ever more sustainable office space because it's moving from the tick box to a must have, particularly among big clients with serious corporate social responsibility (CRS) agendas."
David Tonks, office agency director at of DTZ adds: "We're seeing the pace set by the big businesses - FTSE 100, big accountancy firms, law firms and the like - and government departments who have big sustainable elements in their CSR policies. Because they are so publicly exposed they have to actually follow what they preach.
"All three parts of the equation are now pointing this way. Developers want to build offices that appeal to the market, so they're building what they think the market wants in the future. Investors want an asset that is sustainable, both ecologically and financially. But the real driving force is the occupier, who wants to tick as many green boxes as possible."
What has surprised almost all parts of the Midlands property sector is the sheer speed at which sustainability has risen to the top of the agenda.
Gary Taylor of Argent, the developer behind Birmingham's groundbreaking Brindleyplace development, says that two years sustainability was not even an issue in the market. Now he freely admits it is at the top of tenant's demands.
For many - in Birmingham at least - the turning point was reached in the development of the massive Snow Hill complex in the centre of the city, when developer Ballymore decided to upgrade the project's green credentials mid-voyage, much to the delight of in-coming tenant KPMG.
This has led to other developers having to raise the sustainable credibility of their projects: it is no longer enough for your officeblock to have a greenish tinge - it has to be greener than the bloke down the road's if it is to have a chance of catching a big name, big paying tenant.
Ian Fox of Targetfollow, the developer behind the £330m refurbishment of Birmingham's Baskerville House, says: "It's well understood by developers that to ignore the green agenda is to ignore commercial realities. "Occupiers have put environmental issues at the top of their check list when looking for new accommodation and it is essential for developers to rise to this challenge."
Smeeton says: "It takes two years to build and market a property and you have to second guess what the market will want then. If you second guess wrong then your attractiveness and rents fall. Developers fear they'll under-estimate what the market wants, so the temptation is to go for higher levels of sustainability."
Thus Opus is due to submit plans for some 130,000 sq ft of offices in the heart of Birmingham's financial district and build the city centre's first accommodation rated excellent under Breeam (Building Research Establishment Environmental Assessment Method) - a standard we'll come on to a little later.
Argent plans to hit the same standard with its 107,000 sq ft office building at 11 Brindleyplace, while Calthorpe Estates' 19 George Road, Edgbaston, scheme is the city's first office block to get the rating.
Nor is the chase for sustainable credibility kept solely to the centre of the Midlands' biggest city. For example MCD's £3110m office development at The Butts in Coventry, announced in July 2007, will be Breeam excellent, as will Innovate Holdings' Core 27 campus at Sherwood Park in the East Midlands.
Meanwhile Opus is again going for Breeam excellent at the Opus 40 development on the former IBM site at Warwick, as is Regenco with the 300,000 sq ft All Saints office park in West Bromwich and Staffordshire's £31.7m Enterprise Centre.
Breeam is spoken of like a mantra when it comes to sustainable offices because, although much derided in some quarters, it is now the yardstick by which a building's "greenness" is measured.
Liz Green, a consultant with Nottingham architect TMP Sustainability, says: "Breeam measures a building's overall environment performance not just its energy consumption, but by the materials it's composed of, its location, access to public transport and water usage. One assessment covers 64 different points. It is very difficult to get an excellent rating, which is the highest.
"Breeam guides you on the way to improve a building's sustainability because it looks at the overall picture. It helps people without depth of knowledge and gives them a starting point.
"Over the last 12 months people have been kicking off at Breeam assessments - you can get points for having things like bike sheds, which has discredited it somewhat. That's a shame because it is still a comprehensive way of looking at the issue. There is still a lot of reluctance and misunderstanding about what it entails."
However, Breeam is not the only guide to an office block's sustainability.
In 2006 a strange phrase, Part L, entered the property lexicon. It is the section of the building regulations that deals with sustainability and every new building must pass them.
And some within the sector are putting their bets on another new acronym, EPC, as the future gold standard for in-office sustainability.
The Energy Performance Certificate, which will start to bite from 2009, rates a building's energy efficiency from A to G, rather like a fridge or dishwasher. Its appeal is that it is easy to understand.
While the drive to eco-ise our offices is laudable, the effects it will have on the Midlands' property market will be huge.
As yet no one is sure whether the price of occupying sustainable buildings will mean increased rents or whether they will be absorbed within overall costs.
Of great concern is the availability of high-rated Breeam buildings - there aren't many and there is a general belief that, for some time, there will be a shortage of eco-offices.
Those that are available will be snaffled by big paying, big corporations, leaving the rest of the business community to sweat and freeze in energy-leaking, CO2 stimulating, 1970s and 1980s constructions.
Tonks says: "A lot of buildings are going to dive in value because they're not seen as sustainable. In the short term the effects of sustainability will be negligible, but long term, say five to ten years, they will be massive and ripple out across the industry.
"Buildings that can't get a good Breeam or EPC rating will have problems getting tenants, and that in turn will lead to a huge market in upgrading and refurbishing properties to make them lettable."
Carl Potter, partner at agency GVA Grimley and regional chairman of the British Council for Offices, adds: "This will be good for the market, as companies reject 1970s and 1980s build that are leaking money and energy like water.
"It will have a huge stimulating effect on new build and major refurbishments. Looking forward we would expect every building to become a green building, it'll be expected as a standard, not a desirable option." Indeed Potter expects the demand for eco-correct offices to have a regenerative effect beyond its front door - Breeam's heavy emphasis on issues like public transport is likely to promote regeneration in that sector.
However, it is generally accepted that, despite the glowing phrases, there is still a deep reluctance among large numbers of developers, agents and tenants to really grasp the full implications, or costs, of adopting the green agenda.
Fox of Targetfollow says: "More and more buildings are laying claim to the title sustainable, but in many respects it is a question of definition.
"It is true that a significant number of the Midlands' new developments offering grade A office space will enjoy the most ecologically sound specifications money can buy, but this only tells half the story.
"Take into account the thousands of tonnes of landfill generated by the construction, the creation and transportation of materials to build the development and the kilowatts of energy consumed by the workforce in travelling to and from the site and you have a carbon footprint that will take a good deal of offsetting.
"Meeting the green agenda doesn't come cheap, but it is an investment worth paying. The benefits of green technology for the occupier are significant, with considerably lower running costs." Tonks concludes: "What is going to change is cost. So far companies have managed to adopt the green agenda on the cheap, with a bit of tinkering with showers and bike racks. That's the easy bit. It's what happens next that counts.
"We're still at an early stage, where occupiers don't yet really pay for sustainability, but that'll change."
Over the past few months developers have started to try to outdo each other in a race to create the most sustainable office spaces they can afford.
It is partly out of a need to keep up with government and European green regulations, but mainly just to simply stay in the game as occupiers - particularly big corporations and government agencies - demand ever more sustainability in their office space.
David Smeeton, head of office at agent Colliers CRE, says: "It's true.
There is a race to create ever more sustainable office space because it's moving from the tick box to a must have, particularly among big clients with serious corporate social responsibility (CRS) agendas."
David Tonks, office agency director at of DTZ adds: "We're seeing the pace set by the big businesses - FTSE 100, big accountancy firms, law firms and the like - and government departments who have big sustainable elements in their CSR policies. Because they are so publicly exposed they have to actually follow what they preach.
"All three parts of the equation are now pointing this way. Developers want to build offices that appeal to the market, so they're building what they think the market wants in the future. Investors want an asset that is sustainable, both ecologically and financially. But the real driving force is the occupier, who wants to tick as many green boxes as possible."
What has surprised almost all parts of the Midlands property sector is the sheer speed at which sustainability has risen to the top of the agenda.
Gary Taylor of Argent, the developer behind Birmingham's groundbreaking Brindleyplace development, says that two years sustainability was not even an issue in the market. Now he freely admits it is at the top of tenant's demands.
For many - in Birmingham at least - the turning point was reached in the development of the massive Snow Hill complex in the centre of the city, when developer Ballymore decided to upgrade the project's green credentials mid-voyage, much to the delight of in-coming tenant KPMG.
This has led to other developers having to raise the sustainable credibility of their projects: it is no longer enough for your officeblock to have a greenish tinge - it has to be greener than the bloke down the road's if it is to have a chance of catching a big name, big paying tenant.
Ian Fox of Targetfollow, the developer behind the £330m refurbishment of Birmingham's Baskerville House, says: "It's well understood by developers that to ignore the green agenda is to ignore commercial realities. "Occupiers have put environmental issues at the top of their check list when looking for new accommodation and it is essential for developers to rise to this challenge."
Smeeton says: "It takes two years to build and market a property and you have to second guess what the market will want then. If you second guess wrong then your attractiveness and rents fall. Developers fear they'll under-estimate what the market wants, so the temptation is to go for higher levels of sustainability."
Thus Opus is due to submit plans for some 130,000 sq ft of offices in the heart of Birmingham's financial district and build the city centre's first accommodation rated excellent under Breeam (Building Research Establishment Environmental Assessment Method) - a standard we'll come on to a little later.
Argent plans to hit the same standard with its 107,000 sq ft office building at 11 Brindleyplace, while Calthorpe Estates' 19 George Road, Edgbaston, scheme is the city's first office block to get the rating.
Nor is the chase for sustainable credibility kept solely to the centre of the Midlands' biggest city. For example MCD's £3110m office development at The Butts in Coventry, announced in July 2007, will be Breeam excellent, as will Innovate Holdings' Core 27 campus at Sherwood Park in the East Midlands.
Meanwhile Opus is again going for Breeam excellent at the Opus 40 development on the former IBM site at Warwick, as is Regenco with the 300,000 sq ft All Saints office park in West Bromwich and Staffordshire's £31.7m Enterprise Centre.
Breeam is spoken of like a mantra when it comes to sustainable offices because, although much derided in some quarters, it is now the yardstick by which a building's "greenness" is measured.
Liz Green, a consultant with Nottingham architect TMP Sustainability, says: "Breeam measures a building's overall environment performance not just its energy consumption, but by the materials it's composed of, its location, access to public transport and water usage. One assessment covers 64 different points. It is very difficult to get an excellent rating, which is the highest.
"Breeam guides you on the way to improve a building's sustainability because it looks at the overall picture. It helps people without depth of knowledge and gives them a starting point.
"Over the last 12 months people have been kicking off at Breeam assessments - you can get points for having things like bike sheds, which has discredited it somewhat. That's a shame because it is still a comprehensive way of looking at the issue. There is still a lot of reluctance and misunderstanding about what it entails."
However, Breeam is not the only guide to an office block's sustainability.
In 2006 a strange phrase, Part L, entered the property lexicon. It is the section of the building regulations that deals with sustainability and every new building must pass them.
And some within the sector are putting their bets on another new acronym, EPC, as the future gold standard for in-office sustainability.
The Energy Performance Certificate, which will start to bite from 2009, rates a building's energy efficiency from A to G, rather like a fridge or dishwasher. Its appeal is that it is easy to understand.
While the drive to eco-ise our offices is laudable, the effects it will have on the Midlands' property market will be huge.
As yet no one is sure whether the price of occupying sustainable buildings will mean increased rents or whether they will be absorbed within overall costs.
Of great concern is the availability of high-rated Breeam buildings - there aren't many and there is a general belief that, for some time, there will be a shortage of eco-offices.
Those that are available will be snaffled by big paying, big corporations, leaving the rest of the business community to sweat and freeze in energy-leaking, CO2 stimulating, 1970s and 1980s constructions.
Tonks says: "A lot of buildings are going to dive in value because they're not seen as sustainable. In the short term the effects of sustainability will be negligible, but long term, say five to ten years, they will be massive and ripple out across the industry.
"Buildings that can't get a good Breeam or EPC rating will have problems getting tenants, and that in turn will lead to a huge market in upgrading and refurbishing properties to make them lettable."
Carl Potter, partner at agency GVA Grimley and regional chairman of the British Council for Offices, adds: "This will be good for the market, as companies reject 1970s and 1980s build that are leaking money and energy like water.
"It will have a huge stimulating effect on new build and major refurbishments. Looking forward we would expect every building to become a green building, it'll be expected as a standard, not a desirable option." Indeed Potter expects the demand for eco-correct offices to have a regenerative effect beyond its front door - Breeam's heavy emphasis on issues like public transport is likely to promote regeneration in that sector.
However, it is generally accepted that, despite the glowing phrases, there is still a deep reluctance among large numbers of developers, agents and tenants to really grasp the full implications, or costs, of adopting the green agenda.
Fox of Targetfollow says: "More and more buildings are laying claim to the title sustainable, but in many respects it is a question of definition.
"It is true that a significant number of the Midlands' new developments offering grade A office space will enjoy the most ecologically sound specifications money can buy, but this only tells half the story.
"Take into account the thousands of tonnes of landfill generated by the construction, the creation and transportation of materials to build the development and the kilowatts of energy consumed by the workforce in travelling to and from the site and you have a carbon footprint that will take a good deal of offsetting.
"Meeting the green agenda doesn't come cheap, but it is an investment worth paying. The benefits of green technology for the occupier are significant, with considerably lower running costs." Tonks concludes: "What is going to change is cost. So far companies have managed to adopt the green agenda on the cheap, with a bit of tinkering with showers and bike racks. That's the easy bit. It's what happens next that counts.
"We're still at an early stage, where occupiers don't yet really pay for sustainability, but that'll change."