Hello, Tom. How are you doing? 

 

I'm well, thanks. How are you? 

 

I'm very good, thank you. I wanted to discuss with you some themes that you've pinpointed as emerging in the workspace retrofit area, and the first of those is NABERS. How do you think that that is all going, and how is the market set up to deliver and achieve on some of the things that NABERS suggests? 

 

Maybe I should start off just by explaining briefly what NABERS is. It's a standard that was set up in Australia. I believe it's mandatory for many types of building in Australia, but it's proven to be a very robust way of assessing a building's real world energy performance. It's quite cost effective for people to assess. It's not massively onerous in terms of the assessment process, and it's third-party verified.  Buildings that come across as low energy through the design stage in NABERS tend to be low energy in real life, and it's reinforced - it's not just a design stage standard, it's a standard you then have to follow up and report on the real-world energy performance of your building. So, I think all those things build the trust around it. It's proven to be a very good and high-quality assessment of the building's energy performance. I think as a result of that, it's gaining traction in the workspace market in the UK. Clued up developers, building operators and tenants are looking for this and asking for this... 

 

... but there's a 'but' coming, I can sense. 

 

No, I don't think there is a 'but' (laughs). Designers are well geared up to do the design stage analysis. It's a more onerous and more realistic analysis than you're forced to do through the planning and building regs compliance calculations. So that's good. That's one of the things that makes it a more accurate predictor of real-world energy use. But I guess the thing that is yet to be tested, really, is the in-use part of it, and whether building operators, building owners, have in house or are employing the right skill set to optimize the building performance; to get the in-use ratings to match the design ratings, if you like. We at Max Fordham have been involved in a project called 11 Belgrave Road, which is the first NABERS 5.5-star design stage project that's been built. 

 

Is that the highest? 

 

No, there is a six star. There are six stars in the UK. So, 5.5 stars is the highest achieved in the UK. But that's just completed. And to get the in-use rating, you need one year of building occupied energy use data. And their definition of occupied is when 70% of the floors are let - for a commercial building. So, we're confident that the building will do well, but as with all buildings in use, they require careful attention and active management of energy consumption to achieve a really good rating. And I think something that will prove interesting is whether that changes the skills that are needed to effectively operate a building, if you like. We think that some traditional facilities managers are not...well, they are aware of energy use and monitoring it. They're not totally skilled up to optimize it. There are also companies around who will harvest your data, and on the basis of that BMS and metering data, in theory, tell building owners how to optimize the performance. And that can work to an extent. But I think that building data is often not great. It has gaps in it. It requires interpretation and is affected by what people are actually doing on the ground. And I think that what's needed to get very good NABERS ratings in practice, is some skilled people who are used to both the data analysis and the hardware interface of actually going to buildings, seeing how the buildings are being operated, and tweaking that. 

 

And those people aren't there at the moment, is what you are saying? 

 

Well, I think they are there. They exist in the industry - well, we can do that. I would say that as Max Fordham! 

 

(laughs) 

 

Good MEP consultants are perfectly capable of doing that. But the traditional model is that the designers, you know, they do the design, they check it has been built right, and then they often don't have much more to do with the building. Basically, because clients don't feel they need the designers to have much do more to do with the building after it's built. And one of the things that's good about this standard is that it's not just design. Everyone knows about the performance gap between what looks like good design and actual, real-world performance. This is a standard that will close that performance gap, and the closure will rely partly on robust designs that work like they're meant to, but also on people putting in the time and care to optimize the performance of buildings, 

 

Which fits broadly, doesn't it, with the call that I often hear for there to be more post-occupation evaluations of buildings generally. 

 

Yes, it's a form of that, I suppose, but it's very focused on energy performance. The other thing that's interesting about it is that it's a standard that the landlords will want and building owners will want, because it makes the buildings attractive to tenants, and it's good for their environmental performance themselves, I suppose. But it does require quite close liaison between landlords and tenants to achieve it. The other thing that it will drive, we think, is that landlords will be more interested in what tenants are doing with the fit out, and how that interfaces with the sort of core MEP and original energy strategy for the building. And that's good. You know, that's another good thing, because to get a building to work really well, you want the tenants to do their fit out in a way that aligns closely with the original energy strategy principles of the building. And I think this will drive interest in that. 

 

Now, over to another one of your points that you see as an emerging issue. Over at Westminster and others, where their draft policies on up-front carbon effectively requires significant retention of existing structures, and you question how this will affect which buildings are valued. Would you like to unpack that a bit? 

 

Yes. So, there's an emerging standard that Westminster have put together - their retrofit first policy. The idea that that policy would come into place has been around for a while. There's now some policy guidance which is quite specific, which says what they mean by retrofit first. Westminster are kind of at the forefront of this, but we do anticipate that other local authorities, other planning jurisdictions, are likely to follow suit with something similar. Therefore, it's well worth a read. I think Westminster have put quite a lot of thought into this, and what they are saying effectively is that for retaining anything less than 50% of the structure of a building - so if you have a site and you want to redevelop it, if you keep less than 50% of the original structure - that's classed as a new build in their terminology. Traditionally, people might try and put forward some being a retro fit, if you're, you know, just keeping a few bits, but it has to be more than half of the structure for it to be classified not as a new build. If it's classified as a new build, there are some pretty onerous tests that you have to go through to justify why you're doing that. We've seen some of this play out in in the courts. You know, the M and S building on Oxford Street. But I think partly in response to that, they've tried to set out some really clear guidance tests you have to go through to justify a new build. And as I say, they're pretty onerous. Obviously, if the building's falling down, that's different matter. But if the structure is sound effectively, you have to demonstrate either that it's totally unsuitable for the use that is needed, or that there's a public good by demolishing it and rebuilding it. Both of those we anticipate are going to create, if you look to try and make either of those cases, that's going to be pretty difficult to do, and is a very significant planning risk to any proposed development. 

 

And presumably this is something you applaud? 

 

Yes, I think it is something we applaud. I think the case is pretty clear that the construction industry needs to reduce its carbon emissions fast. Upfront carbon emissions - the emissions that happen as a result of just doing the building at the start - have a very significant impact. The ongoing emissions from operating a building, they can be tweaked. They can be optimized. The grid is decarbonizing. We anticipate that energy will become cleaner over 20, 50 years or so. Those are going to dwindle away, whereas the emissions that you make right on day one just by doing the development, there's nothing you can do about those. They can't be cut once they've been made, so they've got to be reduced at the start. And I think this is a very clear set of guidelines around how to do that and trying to steer what developers do. And I think the outcome is going to be that people will try and avoid doing things that are classed under Westminster definition as a new build, which means they'll be looking to retain at least 50% of the structure of a building. And that removes a very significant planning hurdle by doing that. And I think that'll mean, you know, a different way of assessing whether sites have value - looking at the structure and saying, "What can I do with it?" Say I've got to keep at least half this structure, probably more. What can I do with that? 

 

Half by volume, presumably? 

 

It says it's half by floor slab. Whether that's the volume of floor slab or area of floor slab, I don't actually know. 

 

Okay, but presumably this policy cuts down on things like facadism as well, does it? The mere retention of facades of buildings, and front elevations. 

 

Yes, absolutely. According to Westminster's definition, the facade doesn't count for anything. Any of the classes of retrofit you can take the facade down and rebuild it, but it's all about retention of the structure. The facade does potentially have some embodied carbon reduction value if you keep it, but I think this is a commercial recognition that, you know, mostly people want to do a redevelopment of a building. They're looking to rebrand it, and part of that is about the look of the building. 

 

Well, thank you for going through those two points. Just as a very final, off the cuff question, how is the market at the moment? How is business for you guys, and your peers? 

 

I think business is good. What we're seeing is that, to continue the theme about workspaces, we're not all about workspaces. We work across all sectors, and we're seeing a rebound in residential which has been quiet for a while, a continuing steady stream of good education projects and workspaces. I think the market in central London and other places where there's a real premium on office space is good. And you know, this retrofit agenda is really being driven by people wanting to maximize the value of their assets. So, there's a buoyant market in places where workspaces are seen as high value. And I think once you get outside Zone One and maybe Zone Two of London and other city centre locations like Manchester, some of the things we've talked about, you know, whether rental values are sufficient to pay for things like high NABERS ratings, that's a bit more questionable, and we haven't really seen those areas responding in the same way. But we think it'll come. 

 

Excellent. Thank you very much for talking to me, Tom, and best of luck with it all. 

 

Nice to talk to you. Bye!