The circle of blame must be broken

The ‘circle of blame’ is a vicious circle which recognises four main stakeholder groups: investors, occupiers, developers and constructors and could be the reason for commercial property not being retrofitted as much as it should be, despite the need to reduce carbon emissions from existing building stock.

It argues each group claims to support sustainable building but individually lacks the power to change the market; none of these groups have taken responsibility and choose to blame one another. It is claimed constructors will not build sustainable buildings as developers do not commission them, developers do not commission them as investors do not require them, investors believe occupiers do not demand them and occupiers do not demand them as they are not offered to them. Breaking the circle of blame may be part of the solution to making retrofitting existing property viable in the current market.

However there are a number of issues which need to be resolved before this can happen, for example – even though it is up to the owner of the property to retrofit, not the tenant, the landlord does not hold all the power. In order for a retrofit to go ahead the landlord has to have the tenants consent and the capital which will probably come from investors and lenders. Capital will only be provided if it is seen by lenders and investors as a low risk investment with a decent return, and tenants who see most of the benefits in the form of lower energy bills, claim they are not being offered the retrofit and blame both investors and landlords.

The key issue is that currently there is a ‘split incentive’ for owners of commercial property to carry out a retrofit. Owners invest in property to make money and to maximise return they will spend only what is necessary, so it is a clear discouragement when the monetary savings from retrofitting their property goes to their tenants. There are however other factors to consider with regards to retrofit which can indirectly increase owner’s profits, the problem is showing owners these factors have a monetary value.

This news was brought to you by Morgan Pryce, a specialist tenant acquisition agent with offices in Oxford Circus and the City. Morgan Pryce specialises in search, negotiation and project management and works exclusively for tenants.