Guest editorial
Article Type: Guest editorial From: Journal of Property Investment & Finance, Volume 26, Issue 6
Now that the debate on whether climate change is really happening is over,focus is naturally turning to what can be done to contain both its pace and final magnitude. Given the increasingly accepted wisdom that through its construction, usage and demolition, commercial and residential property in combination acts as a source and conduit through which 40 to 50 per cent of the main greenhouse gas carbon dioxide is transmitted, it is no surprise to see increasing attention being paid to how the nature and use of properties can be improved to reduce the levels of harmful emission. Previously the emphasis has been on residential stock, but there is now also a real focus on commercial property globally.
As such, and in line with almost every walk of political, business or community life, sustainability is rapidly rising up the agenda of the property industry in general, including those engaged in research. Such is the pervasiveness of climate change and sustainability issues that we do not stand before a new “area” of property research. Rather, in the medium term at least, until the issues are understood and absorbed into the rubric of how properties are bought, constructed, occupied, managed, refurbished and demolished, we should expect this to create a new dimension to all forms of property research.
As the concerns about these issues mount and the political and business responses develop, the varied nature of the field of enquiry is beginning to take shape. It is a world in which there are many dualisms for the researcher to explore. These include:
the implementation of sustainability measures in new buildings versus existing buildings;
the pursuit of sustainability aims in both the legal structures which govern properties and their physical structures;
the assessment of how to engage both the landlord and the tenants of buildings to work together to reduce the environmental impacts of buildings holistically;
how to mitigate the impacts of climate change on buildings;
how to adapt buildings to the changes that are already destined to occur;and
how to square the fiduciary responsibilities of investors and tenants with their social responsibilities.
The papers presented in this Special Issue of the Journal of Property Investment and Finance therefore represent an international snapshot of the research being conducted currently in this burgeoning field of enquiry in relation to commercial property, with a particular emphasis on the UK, Australia and USA.
Research thrives on available information. Unfortunately this is taking time to emerge in a property industry which, in truth, is only now taking the issues of climate change and sustainability sufficiently seriously across the full span of its activities. As such, much of the work presented in this Special Issue is therefore necessarily descriptive in nature. This is not meant pejoratively,because some of the papers presented take on the important tasks of illustrating what action is currently being undertaken by leaders in the property industry. It is hoped that this best practice will inspire others to follow and generate novel research questions. Other papers outline the many barriers that exist to reducing the environmental impact of properties and begin to offer solutions to overcome those barriers.
The paper by Dixon et al. sets the context for what follows by identifying how one key group of practitioners (RICS members) are engaging with the sustainability agenda globally. The paper analyses results from a major international online survey of 4,600 RICS respondent members, supported by 31 structured telephone interviews. The results suggest that although sustainability is highly relevant to RICS members’ work, a lack of knowledge and lack of expertise are making it more difficult for sustainability tools and other information to be used effectively.
Lorenz and Lützkendorf’s paper builds on this theme by identifying the key role of valuation professionals and of the valuation process itself in achieving a broader market penetration of sustainable construction. The authors go on to identify both the financial benefits and risk reduction potential of sustainable design as well as valuation input parameters that would allow these benefits in property price estimates to be reflected.
In a very practical sense, Newell’s paper on Australian listed property trusts (LPTs) uses content analysis to examine the emerging LPTs’engagement with sustainability. Given that many of these LPTs are now recognised as international environmental sustainability leaders and are included in the various international sustainability performance indices such as the FTSE4Good and DJWSI, Newell argues that valuable lessons can be learned internationally.
“Green leases” have also featured extensively in Australasia, and Hinnells et al.’s paper considers how such leases might help clarify the landlord-tenant relationship more clearly in the UK. The problem at present is not simply that current commercial leases largely ignore environmental performance, but in many respects they hinder environmental improvements being made. If substantial progress is to be made in improving the environmental performance of buildings then the landlord and tenant relationship needs to change. Two models for greening leases are explored (a “light green” and a “dark green” approach), based on work by the authors from Cardiff University and the Australian government.
Occupiers are clearly vital actors in the burgeoning efforts to mainstream sustainability in commercial property. Miller and Buys’s paper focuses on existing buildings to examine how tenants in Melbourne are grappling with the technical, financial and social challenges of retrofitting such properties.
Finally, Pivo’s practice paper provides an overview of how responsible property investment is part of funds’ drives towards managing funds responsibly in the context of corporate responsibility.
In truth, the papers presented here represent merely “the end of the beginning” for this important new dimension to property research. Increasing numbers of initiatives are now underway to gather more empirical information to understand, for example, the environmental impact of existing stock and, in the belief that if fund managers see managing their funds responsibly enhancing investment returns, the relationship between environmental and financial performance. As this empirical data emerges, the field will develop and become richer and property researchers’ contributions to this important area become even more evident.
It is also clear that policy-makers and professional practice groups are engaging much more closely in their efforts to identify fiscal and policy initiatives that will produce behavioural change in the development, investment and occupier sectors. In a recent UK report by the Confederation of British Industry (CBI), entitled Climate Change: Everyone’s Business, it was stated that “Market forces will drive big changes, but they will not by themselves be enough to do the job. The full range of public policies must be deployed to create the right incentives”.
We can expect fundamental policy shifts then to encourage and support behavioural change in the sector. This increases the need to raise our understanding of what drives change and what the quantitative impacts will be. Clearly, as more and more data emerges, the capacity for this will develop, and the recent commissioning of a range of sustainability research projects by Investment Property Forum in the UK should add further value in this respect when the findings emerge later in 2008 and into 2009. However, in the interim,as the papers presented here show, there is also a need to focus on more qualitative information to develop best practice, as practitioners increasingly immerse themselves in the changing needs and requirements of clients.
Paul McNamara,Director: Head of Research, PRUPIM, UK and Visiting Professor, Oxford Brookes University, Oxford, UK
Tim DixonProfessor of Real Estate and Director of the Oxford Institute for Sustainable Development, Oxford Brookes University, Oxford, UK
