Simple lifecycle assessments for fitouts, a focus on energy reduction, product stewardship for materials, and a switch to gross leases could radically increase return on investment for retail shopping centre owners, says lifecycle expert Dr Caroline Noller.
Noller, the founder and chief executive of The Footprint Company, would like to see a NABERS-style rating scheme for embodied carbon and total carbon footprint for shopping centres.
“Of all the built assets that we have – housing, office buildings, hospitals, schools – the shopping centre, over its lifecycle, has the highest environmental impact,” she says. “And with the increasing trend to us all eating and going out and seeing shopping centres as the place that we can do all of that conveniently, then I think there is a real responsibility for us to have a rating scheme like that.
“If owners really have their eyes on the triple bottomline and the financial sustainability of all their stakeholders, including their investors, then they’d want to maximise or optimise the lifecycle footprint from an environmental and financial point of view.”
Noller would like to see lifecycle assessment incorporating simple embodied carbon and operating carbon at the forefront of all design, and as a development application requirement to show that the building can meet a performance target.
The carbon footprint of shopping centres is particularly high because there is so much built area versus functional area. Car parks, vast public areas and soaring floor-to-floor heights mean they are quite inefficient. The high rate of fitout churn is also a significant driver of embodied and total lifecycle impact.
“The push to keep it fresh, keep it relevant, keep up with consumer trends drives that churn, which in turn drives environmental impact because every time a tenant de-fits then they have to basically throw everything away again into a bin with very little that is ever recycled and reclaimed,” Noller says.
Her company has assessed more than 800 retail fitouts to reduce embodied carbon, and achieve more efficient carbon operating practices, which has also saved money for retailers.
Creativity needed for fitouts
The trend towards dematerialisation among smaller tenants is encouraging, Noller says.
“So the authentic ‘no ceilings’ type of thing, plain walls, recycled furniture and elements in fitout interiors – that’s all completely contributing towards reducing the environmental footprint,” she says.
A requirement for recycled material elements is easy to include as part of the design, Noller says. Lendlease required a number of pieces of the Barangaroo fitout to be reclaimed material. Similarly, Harris Farm Markets at Bondi Junction is a good example of a tenant being mindful.
“It was fabulous to see the dematerialisation and recycling that they have done in that tenancy – they reused all the floors that were already there, they stripped back the ceilings and didn’t put new ceilings in, and have lots of reclaimed materials, ladders and furniture pieces.”
Part of Noller’s role is to steer clients towards more sustainable material choices. For example, convincing food tenancies to do away with the ubiquitous vitrified tiling.
“The carbon footprint of vitrified tile with epoxy grout on a cement bed is 10 times the carbon footprint of some of these recycled-content gritted vinyls or even simple epoxy paint,” she says.
“If you just made that change in a retail tenancy – and floors are a big ticket item, floors are about 20 per cent of a retail tenancy – straight up you are going to be able to save 300 or 400 kilograms of CO2 per square metre and save yourself money.”
Similarly, high levels of fly ash reduce the embodied footprint of concrete while hebel blocks have six times less impact than concrete blockwork.
“These are just normal materials but they are more environmentally friendly,” Noller says. “It’s just a matter of bringing that information to the designer’s attention, which is really our day-to-day laser focus. That’s the only way you are going to make the change, not once it’s been designed.”
Energy reduction equals dollars
Noller says work with Lendlease at Barangaroo proves there is financial sense for all stakeholders in setting energy targets at design, requiring energy to be metered in an operational sense, and rewarding tenants for achieving targets.
“It’s great to have it in design but you must confirm it when doors are actually open to make sure the money that you spent on the efficient technology is paid back,” she says. “A commitment from end to end like Lendlease’s leadership is what we would like to see happen everywhere because that really drives the total lifecycle and the financial benefits to the stakeholders, tenants, investors and landlords.”
Her company’s report on the banking sector found retail branches had an average energy intensity of two to three times that of their corporate offices. The retail tenancies of the big four banks were 20 per cent larger than credit unions, their lighting emissions intensity two to three times that of best practice, and new-generation ATMs were consuming an increasing slice of the “power pie”. There are more than 6200 bank tenancies in Australia and each one has the potential to save $4000-5000 a year in energy costs alone.
Big banks invest large sums in meeting carbon offsets but have a blind spot with their retail tenancies
“Big banks are spending a lot of money buying carbon offsets to meet carbon commitments, but they seem to have a blind spot around the fact that most of their retail tenancies are 50 per cent more inefficient than they could be or should be,” Noller says.
Noller’s company found that more than $45 million savings could be unlocked each year for the banking sector if best-practice fitout designs were consistently delivered.
It has also assessed multinational tenant designs such as McDonalds, Apple and Zara.
“Apple in particular is very interesting because they do a lot of lifecycle assessments of their products but, like many institutional retailers, there’s a blind spot around their retail format,” Noller says.
However, if the big guys make one design change it ripples benefits to future tenancies everywhere.
“We have certainly identified that most of those tenancies have significant scope to reduce their environmental impact and it’s a question of how that information gets up through their enormous chains of authority and the question of how much they really want to ‘walk the talk’.”
In Europe cars have a take back cost factored in. It’s closing the loop style thinking
Most cars in the European Union are now required to have 25 per cent recycled content and be 75 per cent recyclable at end of life. Noller says those product stewardship rules have driven lifecycle assessment to “being just part and parcel the way a product is designed and implemented”. With cars being turned over every decade, the industry will be close to achieving a closed loop supply chain within 10 to 15 years.
“There is a price tag when you buy a BMW or an Audi or something like that in Europe – that is the take-back cost,” Noller says. “That’s the sort of thinking we need to bring to shopping centres, in particular, so we could almost have a closed loop eventually, eliminate huge amounts of carbon from the environment, and improve cost efficiency.”
Bravery required for gross leases
Noller is working on a couple of projects where it aims to unlock the financial value of integrating the base building with the tenancy fitout requirements.
“Ideally I’d really like to see gross leases because then you’d have much more power to actually deliver quite significant income benefits for all stakeholders,” Noller says.
(Gross leases incorporate outgoings which in net leases are added to total charges to the tenant.)
“The industry is very resistant to that because they see that as being a risk.
“It would be great to see the industry be brave enough to go back to gross leases so that the lifecycle approach could really deliver large carbon savings and return quite a lot of additional income to owners and investors.”
Food retail runs on very slim margins. Average energy costs are about $220 per square metre per annum.
“If they were to halve their energy consumption – which is a big stretch, mind you half of them can do it – then that’s $100 or so per square metre per annum that is potential to be shared between the retailer and the landlord. Something that no landlord sensibly would say ‘I’m not interested in’,” Noller says.
“It just requires a different philosophical and management approach and a different set of disciplines, which now are very well available in the market place from assessment to technology to monitoring to evaluation.
“We’ve had 10 years of building this capability in this country in particular, and so it seems to me that is really the new horizon that most CEOs of [real estate investment trusts] really have an obligation to be looking at.
“Leaders need to appreciate that there is a far better investment value in taking this approach for both the environment and for their shareholders. That’s today’s innovation and the leadership we need.”
Changing the game
Noller says the retail development at Barangaroo – with its comprehensive environmental targets – demonstrates that sustainable retail can be achieved.
She has started talks with NABERS and the Global Real Estate Sustainability Benchmark on the real scope for retail and would like to engage with Principles for Responsible Investment and other influencers.
“And to shake up the shopping centre owners – the REITs – a little bit because they have moved from a basis of innovation to pretty much compliance,” she says. “If they were really being leaders and looking at what long-term sustainability is all about for tenants, landlords, investors and the planet, then a more comprehensive approach is really sensible.”