Opinion

On the necessity of collecting tenants’ energy data

Since early 2007, I have had the privilege to be involved in the topic of sustainability in the real estate sector.

BY DERK WELLING

It has definitely become more important over the years, with many of my peers paying serious attention to making their assets more sustainable. I feel encouraged by that, but, at the same time, I am starting to feel that we have reached a crossroads with our massively increased data collection, in which we ask our tenants to provide us with their annual energy and water consumption figures by means of voluntary or legally binding green leases.

As an investment management company specialized in retail, with more than half of the assets under management in high street properties, Redevco has been uniquely placed to monitor water and energy consumption at the individual lease level of our tenants to produce a pan-European picture of retail sustainability across national markets. We have been able to do this for about 75% of our tenant base and have produced seven annual reports of increasingly granular data detail and analysis.

The core focus of our studies has been on energy efficiency, as this is the key issue for tenants in terms of operating costs and the impact on margins. During the last three years, Redevco has made its Retailer Sustainability Benchmark database freely available online so our tenants – or any other retailer for that matter – can compare the sustainability performance data that they generously supply to us with that of their market peers. From this database, we have been able to identify clear trends in energy efficiency and water consumption according to individual retail segments and including small and difficult-to-monitor stores, as well as supermarkets and units within shopping centers.

We see a huge effort throughout the sector to collect data on water and energy consumption to feed into various benchmarks and initiatives like the ULI Greenprint, GRESB, and the ICSC Energy Efficiency score card or reporting standards like GRI G4 CRESD. This is encouraging, on the one hand, as it clearly stimulates the benchmarking of our properties on sustainability, but on the other hand, benchmarking is useless without recognizing that the type of retail tenant is the critical factor in determining the energy consumption apart from the shell and without normalizing the figures for various other factors like cooling degree days, heating degree days, and opening hours, to name just a few. This is why I started questioning the comparability of the data and thus of the benchmarks and therefore the added-value of putting so much effort into collecting information. Also, when we ask our peers or tenants how they are using the pooled data to improve sustainability performance and cut costs, the response is generally silence.

We now face a dilemma on whether to continue with this hugely costly and time-consuming data collection and analysis exercise, because we are seeing very little, if any, improvement over time in the numbers. Should we not find smarter ways and enlist the help and support of the energy and water utility companies, for instance? These are the entities than can provide the complete picture to the market and regulators and truly establish a neutral benchmark to base our sustainability policies upon.

Let me be clear though, that Redevco will continue to demonstrate a strong commitment to “greening its portfolio,” through its adherence to the BREEAM standard and certify the complete portfolio on an annual basis and through our commitment to report on our performance in accordance with the Global Reporting Initiative (GRI) G4 reporting standard. The usefulness of benchmarking and the disappointing outcome in terms of achieving a significant reduction in energy and water usage, however, is making me seriously question the whole underlying rationale of the retail and real estate industries’ mainstream approach to one of the most important challenges of our time.

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