A new index makes it possible to monitor the performance of sustainable property. The industry now needs to target smoother access to the raw data. Louise Ellison and Christina Cudworth report

On 30 June, Investment Property Forum (IPF) and Investment Property Databank (IPD) launched ISPI, a sustainable property investment index. ISPI uses a simple questionnaire to divide individual commercial property assets held within investment portfolios into those deemed more sustainable and those not. This provides two useful outputs:
 

The ‘more sustainable' subset forms a benchmark against which individual property investment portfolios can be judged. IPD received data on 778 investment properties of which 9.6% were assessed as ‘more sustainable' - how would other portfolios compare? The investment performance of those assets that are identified as ‘more sustainable' can be compared with those that are not and with the IPD universe. There should be no relationship between sustainability and performance now as sustainability has not been priced in to commercial property transactions or valuations. However, the groundwork is now in place for monitoring any performance differential over time as sustainability issues begin to bite directly through regulation and occupier requirements.

IPF chose to work with IPD on this project because of their experience in data collection, management and analysis and because of the link that could be created with their property investment performance data. A simple questionnaire was developed that establishes some key characteristics of a property giving sufficient indication of its sustainability for it to be included or excluded from a sustainable sub-set. The areas covered are: building quality; energy efficiency; accessibility; waste; water, and flood risk.

The questions are kept simple and rely as far as possible on third-party independent sources. Data on accessibility is based on proximity to public transport generated from software provided by BaseMap. Data on flood risk is gathered from the Environment Agency.

These third-party, sourced data sets have limitations but they are reliable, accessible and consistent across all properties rather than subject to individual opinion. This was not the case for all the other categories of data covered by the questionnaire. One of the key findings from this project was how unsophisticated we still are as a sector in gathering, storing and using environmental information on our buildings.

It was expected that energy efficiency and building quality would be categories of data that could again be supplied from third-party sources. Energy performance certificates (EPCs) were the obvious choice for energy efficiency, with capacity to move to display energy certificates (DECs) as they become built into the system. BREEAM, or equivalent green building rating systems, would be used for building quality.

If a building has a BREEAM, or equivalent, rating of very good or above it would automatically pass into the ‘more sustainable' category. However, only 10 properties for which we were given data had a BREEAM or equivalent rating. There are over 100 properties within the IPD database that have BREEAM ratings, but as that information is not publicly available they could not be included within the sample dataset.

A building's energy performance was assessed firstly through its EPC if one was available. Somewhat surprisingly this data was difficult to capture, and was often inconclusive. Where funds had agreed to submit data on multiple properties and they had certificates, each certificate was often held as an individual pdf file, thereby making the task of gathering the data extremely laborious. We were also surprised to find how relatively few properties had certificates in place.

While the market slowdown has undoubtedly reduced transaction rates, thereby reducing the rate at which EPC requirements are being triggered, it is still surprising how few funds are systematically obtaining EPCs as part of their asset management process. We expect EPCs to come through over time, but thought needs to be given to how the data are held if the information they contain is to be fully utilised.

The EPCs were also often inconclusive for this research because in many instances there were multiple certificates of different grades for what is deemed one investment asset. While they serve a purpose here, it was clear that the industry needs a more effective system of collecting energy performance data.

The ISPI project received a very positive response from the industry. Fourteen different funds submitted data on almost 1,000 properties. Of these 778 were established as having sufficient data to be assessed and 9.6% passed into the ‘more sustainable' category. This was a great response to a research project, particularly where funds were committing time and effort in providing data. However, what was also significant was that the number of contributors would have been higher had they been able to supply the required data. The number of properties submitted would also have been higher had it not proved so labour intensive to produce what was a relatively basic set of metrics.

We are clearly struggling as an industry to gather and store environmental data on our property assets. Data are held in different places, often in inaccessible formats and using a variety of different metrics making it very difficult to compare across tools. The biggest environmental data collection exercise so far has been triggered by the requirement for EPCs. But the resulting dataset is inaccessible and not stored in an easily searchable or manipulated format. Given that property owners have invested and are continuing to invest substantial resources, both financial and labour, in collecting and submitting these data, it is disappointing that the results are not capable of being more effectively used.

There is a growing demand from industry for some sort of harmonisation of the data required to demonstrate sustainability within the built stock. It is not possible to come up with a single set of measures for an industry as wide ranging and complex as property, but it should be possible to be more proactive in deciding what can and should be measured, and how.

With this in mind the Property Industry Alliance (PIA) has set up a working group, chaired by Paul Edwards of Hammerson, to identify the core criteria by which sustainability is most effectively measured for property, and to establish the most appropriate units of measurement or metrics that should be used for each criterion.Other groups have been struggling with this concept for some time. The Better Buildings Partnership has recently produced a discussion document setting out some principles of best practice in measurement and reporting. One of the key points from that work was the importance of starting simple but allowing sufficient flexibility for the data gathering to become more sophisticated over time.

The outputs of the PIA group will be advisory and they will not relate to any particular tool or benchmarking system. By engaging the people who have to provide the data it is hoped that this initiative will produce a list of workable, useful metrics that can be adopted by industry and by those organisations developing sustainability tools and measuring performance, including government. Working out what data are useful to collect, what we can collect and where the gaps are would be a big step in the right direction.

The ISPI project is an ongoing IPF/IPD initiative and data are still being collected. The questions will become part of IPD's standard data requirements for the UK. Portfolio Analysis Service and CBRE are already looking at incorporating them as part of the standard pro-forma that their valuers complete. We expect that ISPI will become a standard tool enabling fund managers to better understand the relationship between sustainability and investment performance.