What is sustainability?
“When you hear sustainability, what comes to mind?” This question framed the conversation during the first JLL Real Estate Master Class hosted last week in collaboration with the Harvard Business School Alumni Association, at The Wheat Baker. The topic – Delivering Value through Collaborative Working and Sustainability.
“Expensive!”, “The ability to sustain”, “Long term”, are some of the immediate responses provided by the audience members of this informal round table discussion. Asking these questions and leading the conversation was Wangari Muchiri, JLL Corporate Solutions, who is currently based in Kenya and was formerly with the JLL Sustainability team in Australia. The definition of sustainability actually depends on where you are, she explained. In Australia for instance, sustainability is referenced when considering the energy star rating of a building. This is because Australia is a major producer of energy in the Asia Pacific region of the world. In Kenya however, with tourism from the safaris as a major source of income for the people, sustainability focuses on the environment and the welfare of the animals’ habitat. Based on these definitions, the audience deduced that sustainability in Nigeria will have more to do with energy due to the major issues around NEPA and oil. Nigerians need a more reliable source of energy than both of these options. In the property space however, sustainability has more to do with the building and achieving long-term cost effective ‘green’ solutions around energy, water, waste disposal etc.
Does sustainability add value to buildings?
Before delving into what these “green” solutions entailed in the Nigerian context, a healthy discussion was held around the topic of value. What value, if any does sustainability in buildings bring to occupiers and developers/investors alike? Several ideas were shared. Cost cutting, efficiency and risk mitigation were some of the immediate benefits highlighted. For instance, the use of enhanced technology such as energy efficient HVAC systems or solar panels not only improved efficiency, but provided long-term cost effective solutions that were beneficial to the environment. Another value discussed centred around corporate and social responsibility and the impact it would have on a company’s brand and business bottom-line. A third point was around compliance. As more African governments adopt green measures, the need to be compliant will become a necessity over time as sustainability becomes the norm vs. the exception, with penalties in the case of non-compliance. Kenya is newest adopter of such a ruling. The Kenyan government requires solar panels for buildings heating up greater than 100 litres a day (it can get really cold in Kenya!)
What sustainable solutions if any are being adopted in Nigeria?
Three experts in the development, technology and occupier utilization areas where called upon to shed light upon this issue. Michael O’Malley a Director at RMB Westport – fund managers/ developers around successful projects such as the Circle Mall in Osapa and the WINGS development on Ozumba Mbadiwe – explained that green standards where now compulsory for their projects. Green buildings with efficiency ratings were required by their investors and they would not invest if these ratings were not achieved. As such, the RMB team have adopted solutions such as double glazed glass, motion sensitive lighting as well as diesel powered generator’s that allow for both diesel and gas lines. The latter is reflective of their foresight into the future. With the expectation that gas will eventually replace diesel as a more effective source of energy, the RMB team have designed the WINGS building to be able to adopt this energy source once it is made readily available. O’Malley explained that as developers, they need to find a solution where the product is available locally and in close proximity.
Next to explain about locally available sustainable solutions was Christie Elendu the Country Manager of Philips lighting. Elendu explained that Philips now conducts lighting audits with clients which enables them design the most affordable and efficient lighting solutions for projects. She reflected on the need for collaborative work with lighting specialist such as themselves in the conceptualization of building designs. This will ensure the longevity of lightning solutions in building projects and cost savings will be achieved. The costs of manpower for example can be kept low by limiting the need to maintain stand-by electricians through the adoption of lighting solutions such as LED that can last years instead of a couple of months. Phillips expects that by 2025, 50% of the homes in Nigeria will utilize LED lighting; sooner for commercial spaces. The company is ahead in terms of innovation and are adopting best practices and applying them on projects in Nigeria. Instead of the “switch off the light” signs many Nigerians are used to seeing in office environments, Philips have designed motion sensitive lights that dims as sunlight appears or dim and eventually switches off as people leave an area.
The final speaker on the adoption of sustainability solutions in Nigeria was Anne Rinu, Head of Corporate Real Estate at Standard Chartered Bank. For Rinu, sustainability has become a lifestyle thanks to the many innovative solutions they have adopted in their new headquarters in Lagos. This she argues has had an impact on the lives and welfare of employees which in turn has positively affected the profitability of their business. SCB has adopted a number of sustainability solutions. From daylight harvesting that maximizes daylight and energy efficiency lighting to make the ‘building alive’, to rainwater harvesting for recycling and reuse. The building’s high intensity glazing reduces the impact of the sun hence eliminating the need for blinds or sun shades. They also utilize energy rated HVAC and lightning sensors. All of this is managed by their building management system – a computerized software system that monitors all internal systems and controls including the fire alarm, the HVAC and lightning. Hence for instance, if a space is not in use, both the HVAC and lighting go off and this is monitored by the management system. Not only does the system improve efficiency, it also controls costs by reducing the manpower required to oversee each equipment. The automated system measures how much power is used per hour, per month and accurately tracks the spend on diesel and on NEPA.
What is the cost-benefit analyses of sustainability? (Life-cycle costs)
The goal of sustainability in real estate is to maximize a property’s operating efficiency in other words to reduce costs and reduce wastage which in turn impacts the bottom-line profitability of a business. To achieve this may be costly – in the short term. However, its impact on the long term operating costs across a portfolio can be quite extraordinary. As Rinu explained from her over 20 years’ experience in real estate – power represents over 40% of the real estate costs of a total portfolio; 20% in energy and 20% in facilities management.
Imagine explaining to an executive committee board that you can provide cost savings of 15 -20% annually across the lifespan (10-20+ years) of their portfolio from a short-term investment required to track and reduce operating expenses that make up 40% of portfolio costs? The board will probably sit up and listen. The challenge however is that in Nigeria, real estate managers historically have not been able to keep track of these operating expenses. Fortunately this is changing. Through the process of education and/or the use of technology such as the management system mentioned above, real estate managers are taking a harder look at the individual line items that make up their service charges/operating costs and understanding the impact on the business profitability. Being able to conduct an effective audit is now an essential skill for efficient real estate portfolio management. It enables real estate managers make effective cost savings decisions. For instance, Elendu at Phillips mentioned that 60% of the costs of electricity is actually spent on bulbs and on labour. Changing bulbs to more energy efficient options that can last up to two years can bring the costs of electricity down by 40% – this is just one example of the benefit of tracking and auditing service charges and operating expenses.
The bottom-line impact on lives
Sustainability practices do not only impact businesses but people’s lives as well. There is new research now about the effect of having “happy” employees on business profitability. Companies such as Google with “campus-like” offices that encourage creativity and collaboration are leading this trend and effectively utilizing sustainable solutions. Offices designed to have more natural lights, better ventilation and more open spaces are examples of the design solutions that are having a major effect on employees’ health, happiness and the corresponding business bottom-line.
Rinu talked about the psychological feel good effect of having a sustainable building on SCB’s employees in their Lagos headquarters. Happier people want to stay longer at their offices vs. facing the Lagos traffic for instance. SCB has seen first-hand the benefit of adopting sustainable practices. According to Rinu, staff productivity has increased with a direct effect on performance and output by as much as 20-30%.
There is a true life-cycle benefit of adopting sustainable practices in buildings. Starting with positively affecting operating expenses, to then benefiting business profitability and finally improving employee’s lives and back again – sustainability is truly a full life-cycle win-win solution.