As we enter 2024, it seems as though the terms Real Estate and Decarbonisation are embedded to one another. Can you have one without the other? And should you have one without the other? With construction and global real estate generating 40% of the world’s carbon emissions, we hold a real responsibility to change behaviours and help the world drive closer to net zero carbon (NZC) goals… and with 2050 that little bit closer it feels like the new year is the time for change!
Now we don’t mean a new year’s resolution you might forget about come February; we mean REAL, positive, sustainable change that benefits current and future generations. And in the context of Purpose-Built Student Accommodation (PBSA), how can key actions be taken now to decarbonise this thriving sector.
Where to Start.
As with any good movement, you have to start somewhere, and in the circumstance of decarbonising real estate assets, any small shift in behaviour can be truly significant in reducing carbon emissions ahead of 2050. The way we see it, there are 3 core areas to consider where those changes, no matter how small, can start contributing to a more carbon efficient PBSA sector:
1. Operations (Existing Assets).
80% of the 2050 building stock already exists, so when it comes to making a real difference with existing assets, a key place to start is operations. This could be improving operational efficiency to reduce waste, or it could be incentivising operations teams to action sustainability practises on site. Regardless of approach, for existing assets, an operations strategy has to be considered.
For example, smart technologies like IoT devices when retrofitted to existing assets can help monitor buildings in real time and alert operations teams when outliers in noted acceptable ranges occur; therefore, warning operations teams of operational troubles. This could be rooms reaching above 22°C, it could be rooms reducing to 15°C or less, or it could be alerting site teams if a room has been unoccupied for 3 days or longer. All of these alerts allow operations teams to act fast, in real time, and either intervene with residents or reduce heating to save on energy consumption and associated carbon emissions.
Such IoT technology made a significant difference to operational performance in an existing UK PBSA asset, in which Utopi was installed. Our client got weekly outlier reports from the Utopi Platform on an asset that was overheated. Their goal was to reduce the overall asset site temperature by just 2°C, so each week they approached the top 5-10 rooms showing overheating and encouraged them to turn down the heating or better understand their environmental footprint. Within 12 months this asset, based purely on the reduction in energy consumption, had made a total savings of £65,000 and saved 68,311 KG of Co2.
2. Development (New Assets).
With regulations like SFDR Article 8 and 9 strengthening the importance of capital to ESG performance in the UK / Europe, new build assets are already being held to a high standard when it comes to decarbonisation. But what are the real opportunities here to make change? It has to start with embodied carbon. Around 60% of the embodied carbon of an asset is located within the structure of the building, and with the likes of concrete and steel, these materials can be carbon intensive. So, what materials are you sourcing, how far are they traveling to site, can you find local providers, and are there automated technologies you can install now to reduce the embodied carbon associated with products and services when the asset is live? See more on embodied carbon, here.
Unite Student’s ‘Accommodation Matters’ podcast series broke down some great ways in which this leading PBSA Operator is addressing sustainable change in their new build assets:
“We think about sustainability across the life cycle of the building. That really starts from the mining of the raw materials and the impact on the environment and the people involved with that process, through to the construction of the building, and then, increasingly, the end-of-life impacts of the building. What happens to that building and how do we sort of preserve the resources and reduce the impact of the demolition?” (Nicholas Pigula, Sustainability Construction Manager at Unite Students)
And it doesn’t just stop there, the lifetime of an asset should also be considered when it comes to decarbonisation: “Because such a lot of the carbon is embodied in the construction process, we need those buildings to last as long as possible. If the buildings can be flexible – so what student accommodation today could become, non-student accommodation or shops or offices in the future – if the building can last more than 60 years or so, it has the chance of really offsetting all of that embodied carbon.” (James Tiernan, Head of Sustainability at Unite Students)
3. Community Building (Residents).
Now last, and definitely not least, is the resident community approach. Ultimately no real difference can be made in the PBSA sector without the buy-in and the actions of the residents who live in these assets. And with ‘over €12bn to be invested in purpose-built student accommodation (PBSA) over the next two to five years, led by Spain, Italy, Germany, France, and Portugal’ (Savills) more residents will continue to move in and out of these assets.
Mapping out a ‘Sustainable Resident Community Plan’ bespoke to your assets, considering language, culture, religion, background, local vs international students, local weather conditions, etc; is essential. Build a community of action-takers, and suddenly your power to make change grows exponentially. The likes of Novel Student in the UK have an exceptional reputation for customising environmental campaigns across assets and empowering their residents to make change and be rewarded for it. See our case study ‘Progress to Pizza’ for an example of building a resident community to help share the responsibility of sustainable living, and the associated benefits of such a campaign aimed at community building.
One thing is true – the residents in these assets will be the most effected by green change, so community building strengthens your impact, strengthens your possibility for change, and means immediate action can be taken. Plus, this generation is incredibly motivated to tackle climate change:
“Students are some of the most motivated in tackling climate change and in the push for decarbonisation. Unlike with traditional assets such as offices and retail where the shift towards end-user preferences for sustainable environments is likely to be gradual, those wishing to occupy PBSA are less likely to select a place to live if it is clearly out of date, has poor energy efficiency, or is designed and constructed in a way that lacks consideration for the environment. A 2018 report produced by GreenMatch indicated that those born between 1995 and 2012 are 72% more likely to spend more money on goods and services produced in a sustainable fashion.” (Osborne Clarke)
Key Considerations.
There is no doubt that for any real significant change to happen in the PBSA sector (and let us say, this change is being seen across the UK and European markets), that all stakeholders in the value chain have to be involved and empowered to drive this change.
Whether you’re an Investment Manager or Asset Manager, or a Property Managers dealing with residents on a daily basis – you’ll have many trade-offs to consider in the move towards sustainability. But if you can find technologies and solutions that address these 4 key considerations, then as we say at Utopi; green and growth can go hand in hand and ESG / sustainable change doesn’t have to be a trade off to what everyone is held accountable for. Money.
- For Investment Managers: Governance, Green Capital and Return on Investment.
- For Asset Managers: Net Operating Income.
- For Operators: Operating Margins.
- For Property Managers: Resident Retention and Occupancy.
What we do know however, is with NOI margins being squeezed and rent caps hitting the bottom line, ESG is (and will remain) and key consideration for Investors and Funds in the PBSA sector:
“Looking beyond the immediate economic situation, the ESG agenda is next on the minds of investors. On the social side, it is concerns around housing affordability that are front and centre. This is unsurprising given the significant rental growth that has been seen across the continent, with rents for both PBSA and general residential rising by double digits in some markets according to data from BONARD and HousingAnywhere. This raises the spectre of increased regulation, which is also flagged as a concern for investors.
On the environmental side, governments across Europe are starting to tighten regulations around sustainability and decarbonisation, which will put pressure on existing assets and is feeding through to investors‘ concerns. The focus on environmental aspects mirrors the results from Savills ELI Survey, where 77% and 63% of investors rated ‘energy and resource efficiency’ and ‘net zero carbon’ as being very relevant to their investments in the wider Living sector.” (Savills)
So, we know the PBSA sector is thriving, demand is at an all-time high, and while there are more regulations around ESG and sustainable changes ahead of NZC, there are immediate changes that can (and are) being made to decarbonise the sector. The real question is, are you on that path and seeing positive changes in behaviour?
Author: Ben Roberts, Chief Growth Officer and Co-Founder at Utopi.
Speak to our expert team today on how Utopi can help – from ESG Advisory Services to our award-winning ESG solutions. Click here, or email Ben, Chief Growth Officer: Ben.Roberts@utopi.co.uk.