11 February 2021
A personal view of the evolving role of real estate in a world of technological, social and business change, by Richard Pickering, Chief Strategy Officer, UK.
Nature Strikes Back
As people across the world find new ways of doing old things, whilst at the same time being prevented from doing others that were previously an unquestioned part of their lives, some of these new ways will stick. However, in many cases these follow a pre-existing path of change.
If you can remember back to 2019, the big global discussion was about sustainability. Greta Thunberg had risen to celebrity status, and climate activist groups, like Extinction Rebellion, had moved into the mainstream, attracting middle-class grannies and school children. This narrative flowed down quickly to business, with Blackrock’s Larry Fink stating that ‘Climate risk is investment risk’ and various corporate occupiers unveiling carbon negative strategies. The flow down to real estate has taken much longer. However, with ~40% of all energy emissions attributed to the construction and operation of real estate, it is only a matter of time before the regulatory lens and the investor ruler are placed firmly over our industry.
The scope of the real estate discussion on sustainability is multi-facetted. Whilst the primary focus has been on the reduction of carbon emissions, wider considerations such as the reuse of materials, biophilic design, urban farms, the greening of cities and environmental wellness are all aligned to the topic.
In the past year, the cataclysmic impact of COVID has drowned out the sustainability discussion and it would be easy to think that the movement has taken a corresponding set-back. I don’t see it that way. Three significant changes have occurred in the past year that are likely to endure, and in fact accelerate progress on sustainability:
Firstly, we have stopped moving as much. International tourism has more or less been switched off (~70% reduction), and staycations, last seen on this level in the 1950s, have seen a huge resurgence. Of equal importance, as travelling to work has become less frequent, rush hour congestion has alleviated and NO2 levels have dropped by up to 60% in our major cities. It would have taken decades to achieve this in normal circumstances, and while a reverse pendulum swing is anticipated as conditions normalise, we will have moved several steps forward on the path.
Secondly, we are reconnecting with nature. For many city dwellers, leisure and cultural pursuits have revolved around high density indoor activities – the kind of things that have been stopped under social distancing rules. What else is there to do? Well, once you’re fully up-to-date with Bridgerton, for most people this means outdoor pursuits, visiting the countryside and exercise (50-70% increase, depending on activity type). Meanwhile, in the workplace, walking meetings and outdoor meetings are now being genuinely deployed, rather than just spoken about. All these changes integrate our lives more deeply with nature, which is likely to create greater investment in natural environments in the future.
Thirdly, the change of US Administration. The knife-edge result of the recent US elections points the world in a different direction on sustainability. This started with the immediate re-signature of the Paris Accord and an acknowledgement by John Kerry that the path ahead requires a ‘a wholesale transformation of the economy’. It will lead towards a decarbonisation of US power generation by 2035, and perhaps most importantly bring back the world’s most powerful voice to the global table on climate change.
For these reasons and others, sustainability remains in my top two picks (together with the macro impact of technology) for the factors with the strongest bearing on the future of real estate. A small but interesting subset of this broader discussion has been the reintroduction of nature into our cities and our buildings. In the rest of today’s blog I wanted to point to 4 interesting examples that you may have missed during 2020.
La Rue Verte – The city of Paris has announced that one of the world’s most famous shopping streets, the Champs-Elysees, will undergo a radical transformation into a pedestrian friendly green space. Paris, a city with significant pollution issues, is moving in the direction of other major European cities in deprioritising cars in its CBD. This was a bit of a no brainer. At one time grand boulevards signified status. However, in the modern model of more intimate and experience focussed retail, there is no place for 70m wide traffic-intersected malls (for context Oxford Street measures 21m). By narrowing the road, halving the number of cars, widening the sidewalks and planting thousands of trees, the street not only becomes greener, but also better adapted to modern retail. The reclaimed space will also include ‘planted living rooms’ as well as food kiosks, and meeting spaces. The project will stand as a centrepiece to Paris Mayor Anne Hidalgo’s ‘15-minute city’ proposals. If you’re working on regeneration projects, get used to the phrase 15-minute-city this year.
La Caverne – Staying with Paris; if no one is commuting into your pedestrian friendly CBD anymore, what to do with your now disused car parks? French entrepreneurs Cycloponics have found an innovative reuse for a space that they have branded ‘La Caverne’. The multi-tiered subterranean complex has been turned over for use as a mushroom and endive farm. Underground, lightless spaces are challenging to reuse, and probably wouldn’t have been built in the first place, had the opportunity cost of the above ground space not required putting cars in the basement. The challenge to creating truly 15-minute cities will be that most existing food production happens well outside the urban limits. In fact, 84% of fruit and veg are imported to the UK, which reduces resilience and leaves us subject to supply chain issues. Shortening the supply chain brings several benefits, including delivering on sustainability goals. Additionally, some large cities have also shown the efficacy of urban farming in feeding their population. For instance, 60% of all vegetables consumed in Shanghai are grown within the urban limits of Shanghai. There will be further examples of economic redundancy post-COVID, where spaces may not find traditional reuse opportunities. In this context, new green uses offer opportunities to rebalance the purpose and composition of our CBDs.
Green Buildings – Gone are the days of a couple of potted palms in the reception area; modern offices are increasingly incorporating nature as a fundamental element of the design. Last week, Amazon announced a new helix tower design for its Virginia HQ. Sizable native trees planted all the way up the publicly accessible external spiral, give a helix-like appearance to the design. I could add to this list: the green-walled 55 Gracechurch St, Heatherwick’s ‘Stem’ office furniture built out of planters, Zaha Hadid’s bud-shaped Hong Kong scraper, with public gardens, open-air balconies and planted sky-garden, Segro’s green industrial estate in Tottenham, with green walls and insect hotels. This is no longer faddish – green design in here to stay. Not only do these buildings deliver the physical and wellbeing benefits of nature, they also project a strong outward brand message that will resonate with occupiers and the general public, derisking planning and pre-letting voids.
…and Green Basements – In an example which pulls together all of the above (greening, innovative reuse of car parks, urban farms, nature finding a way), a criminal gang has taken advantage of the fact that few of us have been using the office during lockdown, by the clandestine creation of the City of London’s first cannabis factory. The crafty crooks ‘repurposed’ the office basement to provide a setting for sustainable agriculture, local employment and increased biodiversity. ‘The biophilically adapted basement, containing 826 carefully curated artisanal plants, supports a more calming working environment and colleague wellbeing,’ said nobody.
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