The tradegy of the performance gap

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Patrick Brown, Assistant Director (sustainability and construction) at the British Property Federation argues for action to close the performance gap, highlighting that reliance on theoretical assumptions and ratings will not be sufficient…

It has been well documented, as far back as PROBE studies and as recently as the work of the Zero Carbon Hub and the Green Construction Board, that there exists an energy and operational carbon performance gap between how buildings perform in reality compared to their as-designed performance.

The news in recent months has born witness to other sectors realising that market offerings do not live up to expectations, including the automotive industry. Analogies with the property industry are not straightforward – buildings are not just products, they are collections of technical and social systems which is why often it is not straightforward to improve their performance, particularly when occupied.

Arup, in carrying out work for the Green Construction Board on this subject in 2013, highlighted the role of the ‘credibility gap’ which exists between how we think a building will perform in occupation. This was based on design estimates that omit unregulated energy loads (e.g. plugloads) and assume greater efficiencies in fixed services and assumptions that property managers and occupiers will operate plant and machinery like engineers. Anyone who has taught a grandparent how to set the VCR will know this to be a dangerous assumption.

Further issues may arise in particular in commercial buildings that are built for the open market without a specific occupier in mind. The design intent may carry with it certain assumptions about the broad type of occupier that will eventually inhabit the building, but ultimately the tenant’s choice of fit-out and patterns of use can affect the building’s performance fundamentally.

There is also perhaps a commitment gap. Essentially if a building will pass the necessary regulatory hurdles imposed by planning and building control requirements, which are predominantly based on theoretical assessments of energy performance, what incentive is there to deliver real performance on the ground?

There is a real tragedy of the commons here – the regulatory signals that are sent by Building Regulations and planning requirements emphasise theoretical performance within some margins. This approach might have been fine in a world where energy costs featured as a relatively marginal cost of occupation. Forecasts of productivity risks, however, posed by the very real risk of energy supply interruptions (National Grid in its 2015 winter forecast asserted that there was about 1.3 per cent capacity remaining in the grid), and fluctuating energy prices are leading some occupiers, particularly where well-briefed by their agents or in-house property teams, to look beyond the rent and location and other traditional concerns, toward the examination of the likely total cost of occupation of a property. Theoretical assumptions of performance are likely to be of small use here.

Such trends are likely to be emphasised in the wake of the partial-conclusion of the Business Energy Tax Reform, a consultation exercise run in concert by the Departments of Energy and Climate Change, Business, Innovation and Skills, and HM Treasury late last year. At the Budget in March 2016, the Chancellor announced that the Carbon Reduction Commitment Energy Efficiency Scheme, a carbon trading scheme for large corporates, would be withdrawn from 2019, and be replaced by an amplified Climate Change Levy, a tax on energy end users. Some commentators have observed that this was perhaps merely HMRC ensuring that the outcomes of the Business Energy Tax Reform are not revenue negative to it. However, I think it likely to have the effect of increasing the costs of energy for many occupiers, leading to consequent demands on property owners and developers to deliver more energy efficient and low carbon buildings.

Further, looking at the bigger picture, the agreement reached at COP21 in Paris set the introduction of Intended Nationally Determined Contributions (INDCs), including a commitment from the UK alongside the rest of the EU to achieving at least a 40 per cent domestic reduction in greenhouse gases by 2030 compared to 1990 levels. This is in addition to the UK’s own statutory target of an 80 per cent reduction in UK emissions by 2050 within the Climate Change Act. Given that the UK’s buildings account for just under half of all UK emissions, many in the property sector anticipate that the sector will be called upon to deliver an equivalent proportion of those savings. It is clear that unless action is taken to close the performance gap, reliance on theoretical assumptions posed by Building Regulations and theoretical ratings such as Energy Performance Certificates will not be sufficient on their own and may lead to misleading representations of performance on the road to 2050. The introduction of Minimum Energy Efficiency Standards, which will prohibit the letting of buildings that fail to attain a minimum rating of an E from 2018 is a case in point, as a MEES compliant building could be performing far worse operationally than its theoretical rating attests.

So what can be done? From a practical perspective, it likely means investment on the part of developers and owners in more post-occupancy evaluation and testing that design and theoretical assessments hold true. Many market leaders are already doing this, frustrated by the imprecision of design estimates and keen to realise economies for both themselves and their occupiers. The implementation of end-to- end processes that seek to close the performance gap can be more tricky to implement in speculative properties built for the open market since the end tenant may not be known until later in the construction process. This is something we are looking at currently at the BPF to see what guidance can be provided, and we aim to release something by the autumn.

There may also be further merit in encouraging dialogue and collaboration between representatives of the supply chain on new commercial developments. Frameworks such as Soft Landings seek to encourage such collaboration, recognising that silo-isation can lead to problems (e.g. building maintenance may replace a bulb but will not necessarily determine that lighting is insufficient for the purpose intended). Interesting discussions are ongoing in France and Germany in particular concerning the concept of Building Passports, where statutorily-required information concerning a building is attached to a single ID creation of a one-stop-shop for such information, permitting its interrogation and comparison, might yield insights that otherwise would have gone unnoticed. ■

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Patrick Brown

Assistant Director (sustainability and construction)

British Property Federation

Tel: 020 7828 0111

info@bpf.org.uk

www.bpf.org.uk

Twitter @BritProp

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