Wake Up Property, Carbon Neutral Manchester Is Going To Turn Your World Upside Down

Manchester will become a zero carbon city by 2038. This week the city council takes the first steps in an action plan which will see real estate play a mighty part in a short, sharp reduction in carbon outputs.

Can the property industry rise to the challenge, and is the city council pushing it hard enough?

Ahead of the Manchester State of the Market event on 27 March, Bisnow finds out.

The high-temperature political debate about air pollution and congestion, and the imminent plans to introduce a clean air charge in Greater Manchester, have obscured a much larger climate change challenge facing real estate. That is carbon neutrality.

Manchester City Council’s carbon neutral ambitions are going to change the way the city’s property business works. A huge target, combined with a short and front-loaded timetable for reducing carbon, inevitably mean real estate will have to change its ways.

Reports presented to the city council’s ruling executive this week add detail to the commitments the council has already made. They begin to show how much work is to be done, and how fast.

The Manchester Climate Change Board has developed a draft zero carbon framework 2020-2038 and started work to produce a draft action plan for 2020-25.

A front-loaded carbon budget means that overall emissions must fall sharply in the next few years. Of the 15 million tonnes of CO2 the council hopes to eliminate, not less than 6.9 million tonnes will go between 2018 and 2023. A further 3.6 million will be eliminated from 2023-27.

More than 50% of the total reductions required will be short term. “This highlights the scale of the challenge ahead,” the report noted.

The property industry has tended, so far, to focus on the council’s aim of ensuring that all new buildings are carbon-neutral by 2028. The Greater Manchester Spatial Framework, now in the midst of a consultation exercise, puts this commitment into effect.

However, many in the city’s property business are warning that the much bigger problem, with much more serious and expensive consequences, can be found in the city’s existing stock of commercial properties. And this is where the carbon neutral debate gets serious.

Retrofit Klaxon

Take a walk down Mount Street, Manchester, and the property industry’s carbon-neutral ambitions are clear enough.

FORE Partnership strived to achieve an “outstanding” rating in BREEAM’s rating for sustainability. This included eye-catching and visible steps like bringing some of the most innovative solar PV panels ever installed in the UK to their 90K SF Windmill Green office block. Sunpreme’s GxB380 bifacial smart solar panels are ideally suited for Manchester’s climate, which FORE politely described as “mixed”.

The panels provide the seven-storey block’s lighting. FORE also invested in a wealth of research and analysis, much of it expensive, behind the scenes.

“Windmill Green was the first multi-let office building in Manchester to get that BREEAM rating," FORE Managing Partner Basil Demeroutis said. "We tried hard. But if you are developing a single building, then your carbon-neutral options are more limited than if, for instance, you have a big portfolio at your disposal. Bigger portfolios have more tools at their disposal. Unfortunately, though, if you look out of your window the city is made up of 20-60K SF single buildings, not big portfolios, and you won’t solve the carbon neutral problem without tackling them.”

Building a single carbon-neutral block, or retrofitting an existing one, does not come cheap.

“We’re all under economic pressure, and to justify the capital expenditure you need to think you are future-proofing your assets and that tenants will pay for it," Demeroutis said. "At Windmill Green it added between 1-5% to our construction costs, and in real estate you are operating on tight margins. Some of that capital expenditure will yield no payback at all.”

Demeroutis hopes that, eventually, Manchester tenants will pay a green premium for the most sustainable buildings, or that a brown penalty is paid by landlords on the less sustainable blocks. But before that can happen, Manchester’s stock of existing buildings will need to be tackled.

“This means thousands of buildings with hundreds of landlords, that is a significant task,” he said.

The answer, Demeroutis argued, could be a rigorous Manchester energy efficiency standard which runs ahead of the existing national requirements. Today’s booming Manchester market is the time to introduce such a requirement, he said.

Under the Energy Efficiency (Private Rented Building) (England and Wales) regulations, from 1 April 2018 it has been unlawful to grant a new tenancy of domestic and commercial buildings where the building has an Energy Performance Certificate (EPC) rating of F or G.  Some ask why Manchester couldn’t go a little further, pushing the requirement further up the alphabetic scale of energy efficiency?

“I support urgency on firm and decisive steps. It’s incumbent on us to find ways to make that happen,” Demeroutis said. “The nationwide EPC ratings are already having an impact, but in Manchester we could move up the alphabet. It’s something the council could get behind.”

A Bespoke Manchester Solution?

Are there answers? FORE are far from alone in thinking tougher local standards could help. Bruntwood, the Manchester-based property empire and one of 10 pathfinder companies helping the city council navigate a way forward, is taking the first steps in testing new approaches.

Bruntwood aims to move to zero carbon by 2030 (several years faster than the city deadline) and have an immediate target of achieving a 10% reduction in its carbon intensity compared to its 2017-18 baseline. Bruntwood is introducing science-based targets across the business for scope one emissions (direct emissions from things like air conditioning) and scope two emissions (indirect emissions as a result of energy purchasing) in April 2019 and will start to looks at its scope three emissions (which means emissions from the supply chain, upstream or downstream) from June 2019 onwards.

“Our biggest request in terms of policy and legislation at all levels is that it is consistent and joined up, as the most damaging outcomes from the current fragmented and constantly changing landscape are distrust and disengagement," Bruntwood said in a report to city councillors. "Given the likely levels of investment required, we need a clear operating framework which gives us a stable platform to move forward at pace.”

Bruntwood Chief Executive Chris Oglesby would like to see Manchester landlords working together to raise standards.

“While corporate behaviour would necessarily have to change to meet carbon neutral targets, we would like to see developers agreeing to a voluntary Manchester standard on sustainability,” he said.

“We accept that it’s going to cost to do this, but the payback will come, and actually, there’s a greater risk from not doing this kind of thing. Soon funders will only invest when carbon initiatives have been considered as part of a project. As more developers take action, the costs will be driven down and it will become business as usual.

“As a city and as a property community I believe we have to be brave and grasp the nettle by addressing the challenge posed to us all by the low carbon agenda. Quite simply, I believe that it’s essential for Manchester’s medium-term economic prospects that we do this now, from a position of strength, rather than at a later date.”

We Hear You

The city council are listening.

"Manchester is committed to becoming a zero carbon city by 2038. The council has a vital leadership role in working with businesses, housing providers and homeowners to help them to become more energy efficient and ensure that this ambitious goal is met,” Suzanne Richards, City Council executive member for housing and regeneration, told Bisnow.

“Urgent action is required across all sectors of the city's economy, including construction. We are in the process of developing a new approach to zero carbon housing, and we are looking to identify a number of pilot schemes for both new build properties and the refurbishment of Council-owned affordable housing.”

Richards points to housing provider One Manchester as one of the first organisations to trial Passivhaus energy-efficiency standards locally. 

“We will be exploring with partners how further pilot projects to test key principles can be brought forward in the near future,” she said.

With backing like this, tougher action of zero-carbon building cannot be far off. A “Manchester standard” for energy efficiency could be around the corner. And when it comes, property had better be ready.