PRINT THIS STORY:

CHANGE TEXT SIZE:

A NEW SUSTAINABLE LANDSCAPE

EUROPE’S LANDLORDS AND RETAILERS BRACE FOR THE IMPACT OF TIGHTER ENVIRONMENTAL REGULATIONS

By Nicky Godding

Tighter European Union codes TO create energy-efficient buildings are having a direct impact on the retail real estate industry in Europe. The European Commission estimates that proper implementation of the Energy Performance of Buildings Directive will save 40 megatons (26.2 million barrels) of oil by 2020. That is equivalent to an 11 percent reduction in EU energy consumption.

Buildings account for over 40 percent of European energy demand and are a major source of greenhouse gas emissions, according to the EU, so any savings in this area would be a key element of the European climate change strategy.

Keen to speed up progress, the EC has pushed up an impact assessment of the Buildings Directive from 2009 to this year. For the European shopping center industry, this is likely to mean a tougher EU stance on energy performance and efficiency for new and renovated buildings, the costs of which will inevitably fall on the developer in the short term.

Though this might initially translate into higher rents, the lower energy costs of efficient buildings could mean stable or lower rents over the long haul, sources say. “With higher oil prices, sustainability will become cheaper in relative terms, and return on investment will drop from 30 [or] 40 years to 20 years,” said Lorant Varga, CEO of TriGranit, a property development firm based in Budapest that has interests across Central and Eastern Europe.

The EC estimates that EU energy consumption is about 20 percent higher than it should be. European national governments are required to outline the steps they will take to improve energy efficiency in their countries. These could include climate-change levies on EU member states and a speedy introduction of the Energy Performance Certificate scheme for all buildings. Government officials are also seeking to phase out incandescent light bulbs and creating incentives to promote energy efficiency.

There are further directives that could prove costly to developers and landlords and ultimately to retailers. These include the EU’s Framework Directive for the Protection of Soil, adopted in 2006. Then there is the Waste Framework Directive, intended to reduce waste and encourage recycling.

Another important initiative will be the Action Plan on Sustainable Urban Mobility, to be introduced in the European Parliament this year. This is designed to reduce congestion and pollution in cities by discouraging the use of private vehicles, imposing parking charges and taking freight off the roads.

To obtain a building permit, developers would have to present details on their methods for managing traffic and public transportation on and around their properties.

Europeans are by no means the greatest consumers of energy. A study published in November by French energy agency Ademe showed that EU countries use 30 percent less energy as measured against GDP than the U.S., and 40 percent less than China. There are large disparities across Europe, however. Energy consumption measured against GDP in Slovakia and Bulgaria is double that of Britain, which is Europe’s most efficient country. Eastern European countries in general are among the least-efficient countries, while the best performers are the EU’s 15 oldest members.

All of this will require the retail development industry to change the way it does business, says Arco Rehorst, technical director at Multi Asset Management, a Netherlands-based development and investment firm. To help develop common standards across Europe, ICSC’s European Sustainability Working Group, set up last year, wants to use BREEAM (the Building Research Establishment Environmental Assessment Method) to measure building efficiency. Increasingly used in Britain and other EU countries, this is Europe’s version of the U.S. LEED (Leadership in Energy and Environmental Design) assessment.

Some EU states are dragging their heels on meeting their energy efficiency requirements, so the ICSC initiative could at least speed up the adoption of standards in the retail construction industry, says Sarah Lee, of Cabinet Stewart, an EU lobbying firm.

Meanwhile, the British Council of Shopping Centres has launched a Web site to offer guidance on sustainability issues. The site contains details about events, industry research and publications, news and links to government reports, consultations and regulations.

“A lot already is happening in the market,” said Rehorst. “The rate at which developments are getting greener is increasing. The one thing that is behind is the industry standard assessment method and education on the subject.”