Buildings spill more hot air than a politician

Copyright: David Lawson – first published Property Week June 2007

When UK Local Government Secretary Ruth Kelly announced plans for five eco-towns in early March, the world yawned and got on with more important tasks such as estimating how much property prices would rise this year.  Some mistake, surely. If the torrent of headlines is correct, Gordon Brown launched the green revolution when crowned prime minister-elect only a few weeks ago. Welcome to the world of media spin.

  What better way to announce a break with the past than turning a little-known existing policy into a brave new initiative. Greed was good in the years of boom and Blair: now green is God. The creaks of a bandwagon loaded with politicians, planners and - most recently - investors are becoming deafening.  It must be depressing for environmental engineers and property managers who have been screaming at landlords for the best part of their working lives to stop creating buildings that spill more hot air than a political convention.

  Google the term ‘global warming’ and hits cascade into infinity. I was only mildly surprised to discover I wrote a dozen Financial Times articles on the topic between 1990 and 1995.  So what has changed?   Attitude to energy is the key. Panic first emerged in the early Seventies when oil prices quintupled. In the Nineties prices again became important as recession struck. But each time the economy recovered, that panic subsided. After all, power makes up a piddling percentage of business costs, even in new-fangled glass giants riddled with air-conditioning.

 This time, things may be different.  ‘2007 will go down in history as the year when the world finally woke up to the scale of the threat of climate change and started to take action,’ according to Climate Minister Angela Smith. Pompous political sound bites can normally be ignored but a similar message has emerged among powerful business leaders in the last few months.  William Hill, who manages several billion pounds worth of property for Schroders, admitted at the Think Sustainability conference that he was a ‘green tokenist’ in 2006. This year, he has seen the light.  Francis Salway and Stephen Hester, respectively heads of Britain’s top property companies Land Securities and British Land, also proclaimed their faith. Major investors like Hermes, Morley and PRUPIM are already up there on the bandwagon, along with retailers like M&S and Tesco.

  Why the sudden conversion? Spin plays an important role. Some ‘converts’ have actually been closet greenies for years. Land Securities appointed an energy manager 25 years ago, while British Land has been quietly using techniques such as geothermal boreholes under office blocks for years. Sainsbury has been fine-tuning fridges to save power for a similar time.

  Just as Brown saw the opportunity to flaunt green credentials, so have property leaders realised the need to speak out. British Land recently revealed that more than 75% of potential tenants now ask about green issues. These, in turn, are under pressure from staff, customers and shareholders to measure up. Even the kids of top decision makers are asking why their parents are destroying the world.   So should mere mortals be scrambling to join them? What if you merely have a parade of shops in Swindon or an office floor in Scunthorpe?  And if occupiers are so keen on green issues why has no evidence emerged of higher rents?

 Perhaps because SMEs, which make up the bulk of the market, are still in denial.  A survey by business coaching organisation Shirlaws found environmental impact was rated last in a list of 18 challenges for the next five years. Less than 3% of owners and top managers put it in the top five. Recruiting staff is their leading issue but only 10% thought a clear environmental stance would help get and retain talent.  This could change quickly. One key factor may be energy labels for buildings, which will give hard evidence of profligacy and impose a system of as yet undecided fines. They could also underpin energy taxes under Brown’s green regime. Big developers and fund managers have already realised that costs will escalate. The masses could soon catch up.

Key Dates

January 2008 – inspections start for large air-conditioning systems [more than 250kW], an often overlooked part of the EU energy performance directive.   

April 2008 - Energy Performance Certificates [EPCs] for construction, sale or rent of commercial property over 500 sq m.

Jan 2009 – mandatory inspections of large air-conditioning systems

Jan 2011  - inspections of all systems more than 12kW

Costs [UK government estimates]

EPC inspections: £250-500 for small commercial premises. Up to £2,000 for larger buildings. Valid for 10 years.

Air-conditioning inspections £80-5000. Valid five years.  Premises under 50 sq m exempt.


Building regulations for new build. Trading standards officers will check that energy certificates are in place and may impose fines. Enforcement is estimated to cost local authorities £17m a year.