As published in Property Week on 12 July 2023

Hollis is a lead partner in Property Week’s Get Set for Net Zero campaign. We spoke to Katherine Beisler, who leads the firm’s environmental, social and governance (ESG) consulting team across Europe from its Amsterdam office.

Beisler says the level of knowledge about net zero varies enormously, from organisations that still need a basic understanding of how ESG applies to their business to those seeking detailed help with complex projects. “We do a lot of due diligence across Hollis, helping clients to buy and sell or refinance buildings,” she says. “We’ll do an ESG report as part of that, to give an overview of the ESG metrics, risks and opportunities for a site.”

The firm’s ESG experts also join project management teams to advise on sustainability improvements in the field. Beisler originally trained as an architect and worked in the sustainability sector at Cushman & Wakefield prior to joining Hollis in 2019. She concedes: “It would be great if the government could set really clear legislation in terms of energy and carbon use and then give tax incentives, or any sort of incentives, to get there. It is moving slower than the market and not keeping up.” “I was always focused on sustainable architecture,” she recalls. “As an architect, you don’t get to make a lot of the decisions, really, so I looked to move up the decision-making ladder and I worked for awhile in strategic consulting, at the top level of decision-making, which was great. But I really missed doing projects and seeing their impact.”

She adds. “At Hollis we do a lot of retrofits where, if you’re focused on improving the built environment, it’s the best place you can be in terms of going through existing building stock and improving it as much as possible.”

Beisler says Hollis is an employee-owned firm with around 500 people in Europe, mostly in the UK but with offices in Ireland, Spain, Germany and the Netherlands. “We work very closely with each other[and] keep updated on local legislation and local best practices. If they’re doing something better in Germany than we’re doing in the UK, we can share that knowledge,” she says.

She believes the UK’s Minimum Energy Efficiency Standards (MEES) legislation “has been a huge driving factor” that has created “a lot of the impetus” across the property industry. “But a lot of our clients want to go above and beyond, to look at what’s coming down in the future – at what they need to do to be best in class,” she adds.

From that wide perspective, she says the UK’s approach to sustainability remains ambitious. “I hear it a lot, that the UK is not doing enough and the government’s not steering enough, but really I think they are doing pretty well,” Beisler says. “There’s some legislation, which is great, there’s a huge market movement, and consensus from guidance groups [like] RICS and UKGBC.”

Understanding the risks

Those buying property are keen to understand what risks they might face: “Some of the dates for MEES legislation are 2027 and 2030, which seem far away, but will often fall within an investor’s hold period… Beyond legislation, the market is asking a lot more now. They want to know: when I sell this building in five years, what am I going to be price-chipped for? We help them identify those risks and what the opportunities are for improvement.”

She says some clients are specifically looking to buy substandard buildings where they can make big sustainability improvements. “Two or three years ago, we had maybe one or two clients that would do an ESG due-diligence report at acquisition. Now it’s become quite standard. A lot of clients who want to do value-added projects [improve] all the ESG aspects of a project. [They aim to] get higher rental values, lower vacancy periods, better pricing when they sell and better financing – they see all these advantages.”

Beisler adds: “Especially in central London, we see huge demand for sustainable offices. So, if you can offer a highly sustainable office, you’ll see people putting in a lot of money for it. We’re doing a renovation project now where the client is putting about a quarter of the budget into creating a rooftop terrace. They’re seeing it as a way to get people back to the office, as a real selling point for the building.”

The scope of ESG due-diligence reports has also increased over the past few years, addressing questions such as when a building might become a stranded asset or what its resilience to extreme weather is. “We’ve also seen people add certification pre-assessments,” she adds. “If they want to go for BREEAM on all their assets, they’ll want to do a pre-assessment at acquisition.”

Some of those assessments, such as the Carbon Risk Real Estate Monitor (CRREM) approach, involve assessing the emissions generated by occupants, adding a further layer of complexity.

Changing demands

The past year of high inflation, rising interest rates and falling commercial property valuations has not dented demand for ESG improvements. “I would say the opposite,” Beisler says. “In the toughest period, maybe six to eight months ago, a lot of people were saying ‘we’re not doing transactions right now, but we want to spend our capital on investing in ESG upgrades in the current stock’. Transactions have picked up a bit since then, but I’d say it’s even [busier] for the ESG side of things.”

Investors often set the pace, she adds: “When people need to refinance, they’re getting more and more questions on ESG compliance and ESG metrics. So, even if they’re not doing a transaction, doing there financing is also triggering an ESG review of the building.”

Another accelerating trend is looking to certification beyond Energy Performance Certificates (EPCs).“We are starting to see a shift in the market understanding that EPCs are not the be all and end all of energy efficiency of a building. It’s a theoretical calculation of energy use that doesn’t include a whole bunch of actual energy use in the building,” Beisler says.

EPCs still the first step

However, EPCs are still the yardstick used by UK legislation, so a new EPC assessment often forms the first step in making progress towards net zero.

“We try to offer the most practical advice, with costs already included, so a client can make the best-informed decisions,” Beisler says. “Then ideally, we will actually make these improvements, [working] closely with our project management team to get them installed, whether it’s office sites or industrial sites or something else, [we] have done a lot of them.”

She adds: “There are a lot of little nuances we’ve learned over time that you wouldn’t know if it was your first time doing it – things like lighting, for example. We’d specify in our report: you need LED light that has so many [lumens per] watt – it has to be highly efficient and bright. A lot of people might just put ‘LED lighting’ into a design-and- build contract. But what the contractor chooses might not be as efficient, and we really need to make sure those two things match up; otherwise you won’t come out with the [target] EPC.”

Similarly, in a points-based BREEAM assessment, buildings can achieve a given standard “in many different ways”, Beisler says, adding that it takes experience to understand which approaches will maximise carbon reduction within a given budget.

But she also adds that no building can maintain peak performance without management and metrics.

“People go on and on about how important data is to the future of buildings, but if you speak to people who are really in the fi eld, you’ll find everyone saying: ‘If I can get a floorplan, I’m doing well. Good luck getting all that data you’re talking about.’”

As a result, investigating the state of building management is often job number one. “Often we’ll find easy improvements – things that just haven’t been managed correctly,” Beisler says.

More building data the better

Solar panels are a common issue,” she adds. “People might have put them in 10 years ago and never cleaned them, maintained them or checked them. They may not be operating at all. It’s all those things around understanding: is my building operating how I expect it to be operating? The more data and information you have on your building, the better. There’s still a huge gap in people even knowing how much energy their buildings are using.”

Quick wins can sometimes stare assessors in the face, she notes, citing the example of logistics warehouses with heaters at full pelt while loading doors stand wide open. Occupier education can play a big part, she notes.

“When I’m speaking to clients, I usually see a light bulb click when I explain the ‘lean, clean, green’ process. When we’re decarbonising a building, no matter what our decarbonisation target is, we follow a standard energy hierarchy.”

‘Lean’ means improving the building fabric to reduce heat loss. ‘Clean’ is uprating the mechanical, electrical, heating and ventilation systems. “And then ‘green’ is the renewable energy options,” she adds. “PV [photovoltaic] payback has gone down to about two to three years, where it was at seven years.”

Overall, Beisler says she is “very optimistic” about the pace of progress towards net zero. “I sit in the eye of the storm, so it’s hard to say, but for me it feels like everyone’s very focused on it.”

She adds: “I wish this had happened years ago and it was always like this, but OK, at last, we are getting there now.”

Alphabet soup

“Environmental, social and governance [ESG] is like the alphabet soup of the real estate industry, but this one’s important,” says Hollis’s Katherine Beisler of the Carbon Risk Real Estate
Monitor (CRREM). CRREM was developed by the EU with input from various nations, she explains, to “set a target for energy and carbon use for every type of asset in every country around the world. And we’ve really seen, with a lack of government regulation and differences in regulation between every country, CRREM can be used globally to set your energy and carbon targets to meet the Paris-approved targets.

“[It covers] whole building energy use, so not just the base building like an Energy Performance Certificate [EPC] would. It’s really become the standard that we’re seeing everyone [adopt] with the lack of legislation and regulation [outside the UK].” She adds: “People are very sceptical of EPCs because there’s been a race to the bottom – there’s a lot of cowboys that do [the assessment] without even visiting the building. It’s a murky system.

“The CRREM tool is looking at actual energy use. You’re supposed to have 12 months of energy data. Hopefully that’s more realistic than predicted energy use. The intention is to look at how we reduce actual energy use under a certain level, rather than a theoretical energy.”

She adds that different carbon assessment standards are converging: “BRE is updating [BREEAM] energy and carbon chapters – they’ve [gone] through a consultation suggesting that it will be more aligned with the CRREM targets. SBTi [the Science Based Targets initiative] is coming out with buildings guidance, and considering operational and embodied carbon much more than before. It’s really very stringent in terms of what [targets] it recommends, but we’re starting to see a lot of movement in the industry in terms of aligning targets and guidance.”