The New UK Net Zero Carbon Buildings Standard: What It Means for the Real Estate Industry

In 2020, OBI published a paper titled “Building Accreditations – A Developer’s Guide”. At the time, building design was evolving rapidly on the back of the pandemic, with landlords, investors and developers unsure which would be valued by the occupational market and the impact that they would have on rental value, void periods and the investment value of the asset.

Today, a lot of that ambiguity remains. Particularly when it comes to sustainability, NZC and energy efficiency.

To address this issue and help align the industry, a new UK Net Zero Carbon Buildings Standard (NZCBS) is being launched.

The cross-industry group behind the Standard, includes organisations such as the Better Buildings Partnership (BBP), Building Research Establishment (BRE), Royal Institute of British Architects (RIBA), Royal Institution of Chartered Surveyors (RICS), and UK Green Building Council (UKGBC), amongst others.

The standard outlines clear targets for reducing carbon in both new and existing properties, focusing on the following:

• Energy Performance – buildings must meet strict energy use and performance standards.
• Embodied Carbon – aimed at reducing emissions from construction materials and processes.
• On-Site Renewables – encouraging integration of renewable energy sources within the building design
• Whole Life Carbon – a holistic, whole life-cycle view of the building’s carbon footprint from construction to decommissioning.

We expect the Standard to become widely adopted by the real estate industry with benefits and implications for those involved in the delivery, ownership and use of commercial workspace:

• Developers will need to continue to push the use of sustainable materials and building design features that improve the energy-efficiency of the building. This may raise upfront costs, but we expect a boost to long-term property values and energy savings for occupiers.
• Investors, with funds “ring-fenced” for best-in-class ESG driven assets will see the see NZCBS-compliant buildings as more attractive, driving values and reducing yields for prime assets.
• Landlord’s of existing assets may face challenges of retrofitting older buildings to meet the standard. Failure to comply could reduce property values, but those that are able to repurpose existing buildings, will benefit from the whole life-cycle carbon performance of an existing building when compared to a new build. Something we expect the occupational market to become increasingly focused on in the future.
• Tenants benefit from lower energy bills and the chance to meet corporate sustainability goals and NZC targets.
• The construction industry and supply chain will experience increased demand for low-carbon materials to drive down embodied carbon. The track record of developers in delivering best-in-class NZC buildings will become increasingly valued.

 

In summary, challenges will present themselves in relation to the NZCBS, the impact on higher upfront delivery costs and the complexities of retrofitting older buildings.

However, having a single Standard for developers, owners and occupiers of commercial workspace to refer to, should help alleviate the current confusion and uncertainty over which accreditations offer the greatest value to the industry.

What we are confident of, is that any improvements from the industry on delivering more sustainable real estate solutions, will be met with demand from occupiers and investors, who are increasingly focused on exploiting the long-term benefits of lower energy consumption and the reduced carbon impact of the real estate solutions they occupy and own.

The industry must use this new Standard to continue to drive towards opportunities for innovation and leadership in green building practices and design.