Real estate owners turn to tech to achieve sustainability

Out of the 51 gigatons of mankind-produced pollution per year, real estate is responsible for approximately 39 % of total global emissions, the research notes.

To mitigate the effects of climate change, more and more investors are announcing net-zero commitments. Real estate developers and asset managers will need to follow if they do not want to risk their valuation and performance.

According to McKinsey, without mitigating actions, climate risks could reduce annual returns toward the end of the decade by as much as 40 %. Other studies show that certified buildings can achieve significantly higher rents and report higher occupancy than non-certified buildings.

Tenants are demanding more sustainable buildings, as the awareness of their employees and stakeholders has risen. Soon, most corporate tenants will only sign up for buildings complying with ESG Standards, workcloud24 predicts.

The role of digitization

The research also argues that real estate owners and investors will need to improve their climate intelligence to understand the potential impact of revenue, operating costs, capital costs, and capitalization rate on assets. This includes developing the analytical capabilities to consistently assess both physical and transition risks.

ESG is all about sufficient data points which are processed digitally. Hence, every ESG approach should start with digitization and a general check on the systems available to process data.

This exercise gets easier for new projects where the team can simulate a digital twin from the start and hence knows exactly what the building consists of. Creating a digital twin of the building before starting anything in real life can result in significant savings in costs, transport, material, time and energy which plays well into ESG compliance.

However, gathering data and using technology to manage a building based on the data is trickier for older properties where significant investment is needed.

The cost of workplaces

Running an office building takes up to 350 kWh/sqm/GLA/year of operational energy and to build one sqm of GLA up to 3.500 kWh of embedded energy is required, workcloud24 calculates.

In countries like Poland, where 96% of the energy comes from coal-fired power plants, this leads to 2.8 tons of embedded carbon while additional 0.28 tons per sqm per year of carbon is emitted due to operation. With today’s standard of 10 sqm per workstation this leads to 2.8 tons of operational carbon every year and 28 tons of embedded carbon per workstation.

Hubert Abt

“Therefore, it´s crucial how efficient we use space and how much energy is needed to operate it. So, on the one hand, it matters which technology for HVAC systems and lighting is built-in, how it is monitored and on the other hand, it matters how the space is utilized,” explains Hubert Abt, CEO and founder of New Work and workcloud24.

While on the operational side the problem can be overcome by using smart software which lowers the energy consumption during the time the office is not occupied, the problem with embedded carbon only can be solved by using the maximum possible amount of CO2 neutral materials during construction and modernization processes.

While on the operational carbon management side, there are plenty of software applications that support, measure, and control energy, the availability of software measuring and managing the embedded carbon is far lower.

Utilization as a key issue

Studies show that by improving utilization, significant savings on carbon emissions can be achieved. To be able to improve utilization at a time when offices are half-empty most of the time due to remote working, however, requires rethinking the way we use office space.

As everything in ESG, this also starts with data points. The first key issue is measuring the utilization of space. Measurement is possible by sensors that are installed on each workstation or by using space management software.

By using space management software, the floor plan gets digitized. All users have an application that allows them to book their workplace in advance, check in and check out.

The administrator can then issue a report on the average utilization grade of the space, the peak loading times and can manage the hybrid workforce accordingly, this increasing utilization.

“At New Work Offices, this is achieved by the 'Space in the Cloud' concept where tenants can reduce their core space commitment down to 50% and cover the peak loading factor with cloud services,” adds Abt.

Workcloud24 says that increased utilization has a positive effect on leasing activities as the leasing team can make add value propositions to new tenants signing up for the core space and the fact that the product is fully digitized allows the marketing team a multi-level approach which is not in place with the common way of leasing office space.

Of course, this requires some additional investment from the landlord as space must be prepared for immediate use and daily operation, but at the same time, the landlord is able to achieve a premium on revenues with a management-based leasing approach.

Once digitized, landlords can use their locations to create multiple revenue streams and improve asset values or launch entirely new businesses.