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Debbie Hobbs

Head of Sustainability

Real Assets

Bridging the gap between occupiers and owners

How can occupiers be certain that their building owner is providing a healthy and comfortable working environment and that the associated costs are being managed efficiently?

Occupiers are increasingly demanding a healthy work environment and, as such, are undertaking more stringent due diligence on a building’s services before taking occupancy. However can they be certain that their building owner is providing them with a healthy and comfortable working environment for their employees and that the associated costs are being managed efficiently?

In truth, there are a number of multi-let offices that are not operated to provide the most effective environmental conditions for the occupiers, due to poor maintenance and a lack of technical skills within building operation. As a consequence they actually performance of most office buildings falls well short of the designed intent - the so-called ‘performance gap’. This issue is prevalent across all types of buildings in the UK, and is exacerbated when the owner and operator of the building is not the same organisation as the occupier.

This has resulted in a lack of transparency between the owner and occupier, as the tenant is often not in control of their environmental conditions and service charge costs are presented under ‘vague’ headings which make it hard to establish if the charges are actually ‘reasonable’. The incentive to have lower running costs and opportunity to make meaningful changes has therefore been lost. Occupiers continue to pay their bills and the owner seldom knows there is a problem with the building’s performance. This has resulted in many so-called “excellent” offices significantly deteriorating, until major capital expenditure is the only option. Of course the occupier keeps paying the rent and the service charges.

The traditional relationship between Landlord and Tenant needs to change and become more transparent. Occupiers should be allowed to objectively measure and compare the quality of the environment that a building offers and understand how much energy they are using. How else can they make an informed decision about which building they choose to work in?

At Legal & General we have been looking at different ways to make sure our buildings are performing to their optimum. One innovative solution that we have just installed at our Gresham Street office building in London is the Synapsys Solutions’ SIP Billing solution. Through this we hope to create an automated solution that we believe will revolutionise tenant billing.

SIP Billing is an automated tenant billing solution that has been developed in response for a system which is cost effective, complies with the Heat Network (Metering & Billing) Regulations 2014 and provides a framework which encourages landlord and tenant engagement.

Our main challenge was to ensure a fair measurement of each tenant’s heating and cooling energy costs, depending on usage at any point in time, rather than apportionment based on the square metre footage which is let by the tenants or daily energy consumption. The ability to automatically apportion and invoice energy costs on a half hourly basis, based on actual demand, ensures that occupiers only pay for the energy which they consume. They do not end up paying for their fellow tenants who operate longer hours or who have more employees in their space.

The system allows an easy way for the owner to view the operation of the building compared to its design. This includes identifying where air conditioning systems are not providing the environment they should be. It also provides greater visibility for tenants, allowing them to access their own dashboard in order to view and compare their own individual energy usage on an on-going basis. This also allows for greater dialogue between the occupier and those managing the building on behalf of the owner, in order to work in partnership to minimise operational costs and ensure employees are comfortable.

There is now a clear incentive for the occupier to keep their running costs down and create a healthier work environment. It also allows the owner and tenant to create a dialogue to discuss together how the building can be used in a more energy efficient way. Transparency has been created.

This is just the start of how we are looking more widely across our portfolio to help improve the energy performance of our buildings. This solution has highlighted, however, the importance of owners and occupiers working together – both need to have sustainability, costs and health and well-being at the heart of their thinking and cannot work in silos.

For further information

Faye Bennett

Faye Bennett

PR Manager

LGIM Real Assets

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