Property's role in the climate crisis battle after COP26 - Jeff Pearey

COP26 president Alok Sharma could barely hold back his emotions when the climate conference came to a close last weekend.

Last weekend's coal-related blindsiding by some of the world’s largest carbon emitters means that the legacy of the conference will be watered down significantly. But, while many will share in the acute sense of anti-climactic disappointment, there is little denying that Cop26 has refocused attentions and heightened awareness around the need for action now.

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From a business perspective, one of the major focuses – arguably the most important – will be the properties that they occupy. In Leeds, for example, commercial buildings account for more than a fifth of the city’s emissions, with housing contributing even more.

Britain's President for COP26 Alok Sharma. (Photo by Jeff J Mitchell/Getty Images)

The future performance of these buildings will be integral to the West Yorkshire Combined Authority’s ambition to achieve net zero status by 2038. However, as Cop26 highlighted, the current pace of change is nowhere near quick enough. Our latest research identified that 90 per cent of the commercial office stock in Leeds will need retrofitting if it is to meet the Government’s target of all non-domestic buildings have an EPC B energy rating by 2030.

Leeds is at the head of the pack of regional powerhouses in terms of retrofitting – repurposing 1.6 per cent of stock every year – but nowhere near the five per cent we need annually to meet the less ambitious UK-wide target of being net zero by 2050.

The positive news is that some businesses are already voting with their feet, which will no doubt accelerate the actions of landlords and commercial developers who must make the adjustments now to ensure future office stock will meet the issues head on.

The volume of space occupied by Leeds firms with science-based sustainability targets has more than doubled in the past 12 months. Equally, investors are increasingly prioritising green credentials within their portfolios – mandating cleaner outcomes.

As a result, we’re seeing a scenario where landlords are now able to lease their newer sustainable space more readily than older stock. The heightened environmental performance of these refurbished and new properties does come at a price, but it isn’t so significant as to dissuade occupiers from signing up. Sustainable real estate does not necessarily have to be regarded as an expensive ‘nice to have’ option and the overall cost benefit in operation should not be underestimated.

These initiatives should provide us with confidence for the future and empower us to believe that property can do its bit to ensure an increase in global temperatures beyond the all-important 1.5C threshold isn’t inevitable.

But, while these developments will act as standard bearers for the future, we must address the mistakes of the past and upgrade other buildings that make up the existing cityscape.

Importantly, landlords and developers cannot be labelled the villains of the piece – although they do have the potential to be future heroes. Tenants will also need to play their part in sharing the cost burden of upgrading existing buildings. For example, landlords are likely to want to engage with tenants to enter green leases where the environmental management and costs of the property, such as utility bills and the energy improvements mentioned, are there for the benefit of both parties.

Speaking to landlords, it’s clear they are keen to include green credentials in their leases but are conscious of not making them too onerous. However, a step change could be coming where operationally net zero carbon buildings have tightened lease clauses to ensure that tenants are fully co-operative with the operational ambitions of the building.

If it’s true that businesses are on an upward curve in terms of sustainable behaviour then this can be a win-win scenario for all concerned. As was made repeatedly clear at Cop26, the next decade – or eight years if we are being more accurate – need to be a game-changing period if we are to effectively tackle the issue of climate change. As 2030 is, in reality, just one property cycle away, office stock must keep up with the climate agenda or risk being left behind – or, worse still, hinder the prospects of future generations.

Jeff Pearey is head of JLL Yorkshire, a property firm.