Beyond The Badges: Tackling Sustainability with CEG's Paul Richardson

In this episode we explore the ways in which landlords and tenants can come together to move forward the conversation surrounding sustainability beyond ticking boxes – instead driving behavioural change and focusing on meaningful metrics.   

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Transcript

Dieter Wood: Welcome to Thrivalism,  Interaction's podcast, focussed on the art of thriving, flourishing and evolving under any conditions. In this series will examine how to create thriving businesses, culture, careers and places. We explore key topics such as workplace design and build, culture and community sustainability and, of course, the future of work. 

Join us and our guests as we explore how people and businesses can set themselves up to thrive, not just survive. 

I'm joined by Paul Richardson, who's the asset manager of CEG, a national developer, currently building one the most sustainable office buildings in the UK. Paul is passionate about buildings that create a positive impact on people, communities and the environment they set. 

And it's really great to have you on Thrivalism, Paul.

Paul Richardson: That's great. Thanks for inviting us, Dieter. Good to join you. 

Dieter Wood:  So, I mean, on the face of it, looking at your CV. You've got a degree in estate management. You've been a surveyor in various kind of UK practices before joining CEG as an asset manager. I mean, that's a typical career path for someone to be successful in property. I suppose there must have been some challenges and some people on the way who've made that journey interesting. Could you pick a few of those for us?

Paul Richardson: I think that the one thing to say with regards to any career in property is never two days are the same throughout. So, I started life as a grad, working in property management and then working through landlord tenant agency work before joining CEG back in 2007. And obviously the journey through with CEG has been interesting over those years. Business has changed significantly and I think we'll probably end up touching on a lot of these points as we go through the podcast. But I think one of the most interesting things is that the sort of dynamics between landlords and tenants, you know, the old sort of adversarial relationship of a number of years ago has given way to a much more sort of collaborative way of working, which is, you know, being open, honest and it makes our job a lot more interesting. 

Dieter Wood: Yeah, absolutely. It is interesting that you picked that as the thing that has changed the most in your career. I didn’t know if you were going to grasp at the effects of the recession, just as you joined CEG, or some of the major projects you’ve been involved in. Obviously, that for you is a real key thing that has changed that relationship. 

Paul Richardson: Yeah, it's something that I'm very passionate about. And even joining as a grad couldn't really get my head around this this sort of approach that seemed to be ingrained in the in the industry, whereby whatever tenants would ask a landlord, and the initial reaction was to say “no.” 

From early in my career, I always adopted an approach of understanding and reasoning in terms of any dealings with occupiers. And I'm pleased to see that that's sort of made its way into the mainstream or is certainly making its way into the mainstream. And I think that has given way to a lot of the trends that we're seeing and no doubt will chat around in terms of sustainability and requirements for flexible space, etc. It is all underpinned by that stronger landlord tenant relationship and doing things differently, more collaboratively.

Dieter Wood: I suppose it's not only the relationships with the occupiers who are in the buildings, but the cities that you guys build in and the communities that you build in. And I suppose there is an expectation these days, that the buildings you create add benefit to the community around them. I mean, what's the hardest challenge of making that balance with investors?

Paul Richardson: It’s a challenge that’s becoming easier in the sense that occupiers are looking for buildings that are ingrained in a community and have a long term vision and a long term purpose. I think there are a lot of occupiers out there that have been stung by end of term costs, that unexpected dilapidation, etc, etc, all pointed back to this sort of more adversarial world between landlord and tenant. And I think now and certainly from CEG's perspective, where we can take a long-term investor approach to a lot of our schemes, we can look at things differently so we can look at providing flex space to supplement occupiers in taking their traditional space, giving occupiers as an opportunity to grow their businesses and flex their businesses within office space. And it's looking at it from the occupier perspective as opposed to just purely from the investor perspective.

Dieter Wood: Do you think it's the change of the personalities of the property industry that just naturally evolved that? Or is it absolutely market driven?

Paul Richardson: I think in all of this is a bit of both, really. I think businesses themselves have changed. We’ve seen examples of particularly legal companies where they’ve changed their structures, they have a more sort of flat line structure at the top of these businesses because they recognise that people and again, this is pre-Covid, people didn't necessarily have the aspirations to move through the business, to get to partner, to continue to relentlessly chase down work and win work. They recognise that the people were trying to move on with their careers, but also value their work life and their home life and their family life, etc. So we've seen businesses react to what people are looking for. And then we've also seen that reaction from businesses in terms of how that then impacts their real estate strategy as well. And again, it makes our role so much more interesting now that businesses are typically looking at workspace more as a strategic tool within their or as part of their business plan, as opposed to this sort of necessary overhead that they need in order to operate, and that's really refreshing. And it just gives us an opportunity to work with businesses to really try and add value, as all other industries do to their customers.

Dieter Wood: Obviously, we're talking about the demands of the occupiers. And in so many of the conversations that we hear all about sustainability, and that's a proper focus for everybody who's in our industry now. You know, they are clearly very vital conversations, but there's a lot of noise, there's a lot of conflicting messages. There's a lots of complicated standards that people understand and different interpretations of what should and shouldn't be done and what can be achieved. What would you say to someone who's standing outside of industry? What are the things that they should really focus on?

Paul Richardson: I think one of the issues are there are so many accreditations within the industry, ranging from BREEAM, EPC, a design for performance approach, neighbours - which is a new better buildings partnership backed scheme which was launched earlier this year. And there's also a lot of conversation around carbon and the performance of buildings both in operation and embodied carbon, which is carbon in construction. We are seeing that industry bodies are now building frameworks and ways of effectively allowing you to audit your credentials against these badges. So as an example, the UK GBC recently launched a scope and definition of their approach to carbon net zero in operation. And what that allows us to do is finally benchmark that, because prior to that UK GBC definition being presented, the industry was making statements around carbon performance without effectively having a benchmark to sit against. That, we feel is a game changer. And I think it's, you know, as a business that it's really important that we are able to make statements against industry recognised approaches.

Dieter Wood: Is there a danger, I suppose, that it adds to the many accreditations that you are expected to perform against? And, you know, I suppose there was the occupiers are saying, make this simpler for us. We want to engage. We want to make sure we're in the very best buildings. It's really important for us as a business and for our customers and for our staff. And they want to, I suppose, have less accreditations that they could deal with.

Paul Richardson: I think the answer is education on all sides, both on the developer side in terms of the products, what they're delivering and how they're accredited against that product. The agents in terms of being the main conduits between developers and occupiers, but also from an occupier perspective in terms of what really adds value to them and to their business. We have examples of businesses being very clear that they require an EPC A-rated building, and the perception being that that building therefore operates using less energy. But we know that a deeper dive, that there are examples nationally of buildings that have low EPC state ratings that actually use less energy than EPC A-rated buildings. So it's that sort of education. But I think what it nicely does is kind of loops back around to what I was saying at the beginning in terms of opening the dialogue between landlords and tenants and having a more collaborative approach to understanding each of these propositions. Both the landlords understanding what tenants are looking for, but also for the tenants to engage with landlords to understand the messages that we're trying to promote. 

Dieter Wood: Absolutely. Obviously, sustainability is only part of the picture and getting the energy to that building is really, really critical. There's a lot of complex issues and myths, I suppose, around green energy for these buildings. How do you break that down and make it simple for occupiers to understand that element?

Paul Richardson: Again, that's been driven by changes within the industry and changes within regulations and what is defined as green energy and the UK GBC are doing a lot of work around that in terms of helping with that definition. That allows third parties to really audit how landlords are procuring their green energy and therefore how that green energy is then being badged. And I think a really key point on that is the process of additionality in terms of what is delivered within that green energy. 

Dieter Wood: Yeah. In terms of, you know, green energy, the accreditations with those buildings, a lot of complex issues going on. You obviously always want to do the right thing, but there are tough investment decisions to make to achieve the standards that you guys aspire to. How far those investment decisions made and how difficult are the conversations to keep track internally?

Paul Richardson: I think in terms of the principal and our aspiration to deliver sustainable buildings, that's very much at the heart of CEG and the heart of our business. One of the biggest challenges is the change in technology, the speed of change in technology. And it's a really exciting time. We specified some light fittings only, only very recently, which we're now going back into design to look at because we've identified a much more energy efficient system. That's the physical product. On top of that, you have other changes in technology, the rise of smart technology, the approach to delivering smart enabled buildings is in a way very similar to sustainability in terms of there is a lot of noise around smart buildings and smart tech and there are a lot of gimmicks that flow from that that noise. What we want to do and what we've done with sustainability, is make sure that we interrogate our approach to smart as we do with sustainability, to make sure we're delivering design that drives real value and real performance for occupiers. 

I think there is a risk that some of the smart tech that we're seeing in the market can be classed as gimmicky to unlock marketing conversations. That's not something that really sits well within our business. So on the smart, for example, we're keen to ensure that when we look at smart technology, we want to ensure that it's fulfilling either a better interaction between people and the building. It helps to drive performance in terms of sustainability. So that ability to better control your local environments or alternatively, we're designing the building so is it future-proofed to accommodate future smart technology going forward. And I think those are really key values that occupiers can really realise from smart tech as opposed to a wayfinding system, for example, that you can download on your phone to find your way around the building. I mean, ultimately, if you have to use a phone to find your way around the building, something's gone wrong with the building design, that's very much our approach. 

Dieter Wood: I mean, obviously the investment conversations that you guys are having on one side of it and the occupier conversations where the type of occupiers you guys are attracting have a very clear environmental sustainability agenda. How different has the seriousness of those conversations become in the last two or three years in terms of, you know, obviously these things attract cost and the tenants ultimately have to pay that? Do you feel there's been a significant shift in the last two or three years with occupiers?

Paul Richardson: I think there has. I think pre-Covid we were starting to see a trend of occupiers making moves to quality in terms of the quality of buildings that they're occupying. We fully expect that to be a trend that will accelerate post-Covid. We are seeing examples of that in different markets. And I think a lot of it loops back to earlier points that we made in the conversation around occupiers and their approach to putting people first within their business. People cost is the highest cost for most businesses. Therefore, businesses have realised that there is value in delivering services and offers within their business that adds value to their people and therefore it helps to attract and retain the best people within their business. So I think putting that to one side, occupiers can see the value in the real estate offer to support that strategy. So, from an occupier’s perspective, it's worth committing to the high-quality building that delivers your ESG credentials, it delivers better amenity provision for your staff and helps with your staff well-being ultimately and therefore helps drive business performance. So it's no longer just a conversation around rent rates and service charges. It's a bigger, much more interesting conversation. 

Dieter Wood: I mean, definitely. I think one of the places where I'm very conscious of that happening is with the EQ building in Bristol. And of course, that evolved out of what was the Aspire building. And there was some really big changes that happened to that building from what it was to what it is now, what you guys are planning to deliver into the market. What where the key conversations and the key factors that made those changes? 

Paul Richardson: So the original Aspire development, which was 200,000 square feet secured planning permission back in 2014, the original business plan was effectively to secure a pre-let to fund that building to get that going and bring it out the ground. Obviously, 2014 clashed quite closely with Brexit and various other uncertainties that were in the market. And ultimately, the pre-let was not secured. The building was transferred to a different fund back in 2018, CG retained as investment and development managers, but importantly, the business plan changed and it moved away from delivering the building through a pre-let route to being able to deliver the building speculatively.  

And in doing that, it meant that we could look at a building in a slightly different way. So we gave ourself 12 months to re-open design packages, to look at improving the design of the building, to respond to what occupiers are looking for in the new world, the main packages focused on sustainability and amenity within the building. So this idea of putting people at the very heart of the building was absolutely central to that redesign and the packages that we opened for EQ. In delivering EQ which is a building which has been a complete redesign from Aspire, we're still delivering 200,000 square feet of office space. We have similar size floor plates at 27,000 square feet, but what we're doing is we're moving the dial on in terms of sustainability credentials. 

It's now the first new built office building in Bristol to commit to net carbon zero in operation in accordance with the UK GBC approach. And in addition to that, we've actually handed over nearly 10 percent of the floor space within the building to amenity provision. So within the EQ design, we have ground floor café, decent sized breakout space, fitness space. We've got a central atrium for events and presentations and on the top floor we've got a really cool restaurant bar with a South facing roof terrace. And I think summing all that up as the redesign progressed, we wanted to do was rebrand the building to reflect the values that we've just captured as part of that redesign. And in looking at that, we kept coming up with themes around balance, this idea of work life balance within the building, which led us to terms like equilibrium. So we debated about calling the building Equilibrium, but I can't spell it, let alone pronounce it clearly. So we quickly sort of dialled that back. And that's how we arrived at EQ as the name for the building in Bristol. And essentially, in a nutshell, EQ really stands for this idea of the perfect balance. It's the idea or the desire to live and work sustainably. And that's what we're trying to capture within EQ.

Dieter Wood: It is interesting that all of those factors you talk about are kind of in some ways reflect, I think, the ethos of Bristol as a place and you guys develop in different cities around the UK. How do you feel that is something that really captures Bristol as a place and the type of occupiers that are in Bristol that want to take that kind of space?

Paul Richardson: We think it's really well tuned in to Bristol. Bristol is a very young, progressive, environmentally focused city. I think that's been demonstrated in the last 12 months. Greta Thunberg came to the UK and she spoke in Bristol. Bristol has that dynamic and we think Bristol is ready for EQ as an offer.

Dieter Wood: Obviously, this thing is forever evolving, it’s forever moving forward. It was interesting, I was looking at the parallel between Aspire that could’ve been built and EQ which is being built, and up in Leeds you’ve got your Kirkstall Forge development where you’ve got Number One which is built, and Number Two which is evolving as a building. What's the next phase do you think if EQ was being built in 5 years' time, what do you think the things we’d most likely see? 

Paul Richardson: Well, I think one thing to mention before we're going to that is, is this sort of long term investor approach. Because what is interesting is if you design a building to perform in operation and you apply a long term investor approach to that, then you can continue to invest in that building. You continue to drive performance. You touched on Kirskstall Forge, that was a building that PC’d in 2017, very successful building, fully let within 12 months, it won the BCO award for Best National Best Commercial workspace. But we didn't rest on our laurels with that building. We implemented a post-occupancy evaluation process. So we periodically undertake reviews of the building and its performance, which allows us look at that and see whether it's performing against design and where it isn’t make investments to improve. So one example is that we identified the energy usage within the building was exceeding where we were initially expecting it to be. A lot of that was driven by the amount of fresh air intake that we were delivering into the building, which was pushing energy usage up. As a result of that, we've retrospectively fitted carbon dioxide sensors back into the building, which allows us to maintain levels of fresh air that are required within the building, but actually to add better control over the energy usage around tempered fresh air. So I think that long term approach to managing property is going to be very important going forward, particularly as technology changes and improves. In terms of future design, again, that's changing rapidly at the moment in terms of new technology, new materials, new levels of expectation. So I think it's going to be a really interesting time for the market going forward.

Dieter Wood: Yeah, I think it's not just design that's going to change, it’s exactly what you spoke about at the start, this relationship between landlords, developers and the occupiers that are much more aligned relationships and a much more expectation that the benefit will continue throughout the life cycle as opposed to their occupation. I suppose what are CEG doing to make sure they are at the forefront of that and to make sure that that relationship is as close as it possibly can be? 

Paul Richardson: CEG have a long-term strategic approach to property management. We manage everything in-house. So, we have our own FM team, we have our own what we refer to as being the “life team” which is our dedicated team that activate this amenity spaces we’re providing within buildings. We've seen examples where developers have created amenity space within buildings, but without that sort of activation and that program of events that amenity space can sometimes just sit unused within buildings. So we're really keen on controlling as much of that experience as we can. We don't use third party agents. We therefore feel as though we're in a better position to build up that strength and depth of relationship with occupiers going forward and ultimately engage with occupiers. So within our existing portfolio, pre-Covid, we welcomed about 25,000 people daily to the buildings. Our building managers hold regular meetings with occupiers on site to talk about a range of subjects, whether that is supporting businesses with green credentials, supporting them with their charity initiatives, or even just getting feedback around travel arrangements or amenity provision within the buildings. I think it all points back to: landlords that can engage with tenants at the right level, in the right level of detail, but to progress a more collaborative approach, delivering benefits within real estate. 

Dieter Wood: I’m super excited to see EQ come out the ground. It's going to be it's going to be a fantastic space for Bristol. And I think the connection between EQ and that kind of streetscape there, I'm really excited about. Absolutely.

Paul Richardson: Yeah, absolutely. We're really excited to be on site delivering EQ and really excited by everything else that's happening in Bristol. The announcement of the works that will be changing Bristol Temple Meads station, etc. There's a lot going on. We're excited to be a part of it.

Dieter Wood:  It's been really interesting to hear behind what's going on in terms of these new developments and some of the challenges, I think which developers have and some of the solutions that you guys are putting forward with occupiers is really interesting. Good luck with EQ and really looking forward to seeing it come out of the ground.

Paul Richardson: Thanks so much for inviting us on.