Office Asset Optimisation

Environmental, Social, and Governance (ESG) considerations have become critical for office asset managers and owners in order to effectively manage investor and tenant demand.

Understand the asset’s current performance against current and pending legislative updates with the EU Taxonomy and Energy Performance Building Directive (EPBD) respectively.

Implement asset level governance reporting standards and climate risk assessment, this could be linked to ISO 14001 or 50001, building certifications or social value frameworks to measure and improve performance against and over time, and to mitigate or plan for future risk.

This is against a backdrop of mounting regulatory pressures across Europe to achieve not only environmental performance standards¹ but to also generate social value. The good news is that many sustainability measures make positive business cases from the outset. However, it is important to set realistic sustainability investment targets that are aligned with the overall return metrics for the asset. For example, targeting payback periods for sustainability that match target annual returns for the asset or portfolio.

More widely, investment into ESG shouldn’t just be viewed through the lens of meeting legislative compliance or achieving a certain sustainability

OFFICE ASSET OPTIMISATION FOR TOMORROW

rating. Rather, sustainability investment can drive financial

returns through greater operational efficiency, tenant attraction/retention and appealing to potential investors while simultaneously staying ahead of forthcoming regulatory compliance. Regarding integration of external social impact factors in the office sector, asset owners can evaluate the success of their social programs by measuring local job creation or public amenity creation, rather than purely thinking of it in terms of a valuation uplift. The positive effect of looking at integrating social factors into downstream can lead to brand enhancement.

Identify capital planning requirements to improve the asset to compliant standards and Net Zero standards and build this into cash flow modelling. The delta between compliance and Net Zero may not be as investment difference as expected.

Offer transparency to tenants on the current performance and future performance trajectory to meet targets such as Net Zero Carbon – to align with the Sustainability strategies of the occupiers, and provide confidence that there is a plan to improve sustainability credentials of the asset. This can be strengthened by offering green leases to tenants.

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¹https://www.cushmanwakefield. com/en/united-kingdom/insights/ obsolescence-to-opportunity-emea

Implement robust energy management and HVAC optimisation programmes to manage the asset as efficiently as possible.

While there is no “one-size-fits-all” solution, the following areas could provide opportunities for office asset managers and owners when seeking improvement in ESG credentials for operational assets:

At a portfolio level using smart and effective tools like Cushman & Wakefield’s Green Buildings Tool can help map assets that are of priority in your portfolio.

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