The green shoots of retail

Sometimes one might think it easy for an EU official to issue directives. For example, according to EU directive 2010/31/EU, by the year 2020 all new buildings will have to prove that they are close to being zero-energy buildings, while by 2050 carbon emissions from all buildings need to be as near to zero as possible. This appears a rather ambitious target, and especially so for the retail market, which continues to lag behind the office market in terms of the absolute number of green certificates issued (around 30). But this fact does not seem to signify any lack of enthusiasm on the part of developers or asset managers to apply for such ecological certification (mainly BREEAM In-Use). "It is company policy," says Cezary Kopij, a project manager for Neinver Polska, explaining why Neinver applied for BREEAM certification for the Factory Warszawa Annopol outlet centre, which has just opened in Warsaw. "And we are doing the same in Italy, France and Portugal. We expect our buildings will have a higher value since we will have savings on the occupancy costs," he adds. His sentiments are echoed by Vasilena Petrova, a project manager for Globe Trade Centre (GTC) responsible for the Galleria Burgas mall in Bulgaria: "Being a public company with social responsibilities, we at GTC, similarly to all big companies worldwide, are highly concerned about preserving the planet and all natural resources," she says. Marcus Wild, CEO of SES Spar European Shopping Centers, is more forthright: "Building green buildings just for a certificate is something that is better avoided. Going green should be part of a company's DNA and not just lip service. The marketing advantages of certification are also frequently overestimated. It may, however, be helpful in certain circumstances to submit to such certification processes in order to gain an expert evaluation of one's green strategy. Green buildings shouldn't be built for the certification's sake, but rather because our real estate developments should remain an integral component of a vital and urban real estate culture in 20 years," he explains. His company is planning to build a 32,000 sqm BREEAM-certified shopping centre in Ljubljana-Šiška in Slovenia, in an investment of EUR 100 mln.

Too pricey to be BREEAM?
But why are there not more green-certified shopping centres. The answer seems to be partly one of the perceived cost. "Five years ago the market thought such solutions to be too expensive," explains Renata Kusznierska, the director of the retail agency and property management at Savills. But recently these technology prices have been falling, which Justyna Kur, the director of the property management department in Apsys Polska, has also noted: "The ever-increasing ubiquity of new solutions results in their prices being lower than in the beginning, when they were first put into use. More or less every two years we can see new competitive technologies appearing on the market. Producers compete with each other in the durability of their technologies and practicality of their usage as well as on price. In a few years' time products that are today seen as fashionable and ecological will be as commonly used as bricks and concrete were a number of years ago." Apsys has already achieved BREEAM certification for a number of its malls in Poland, including Manufaktura in Łódź, which at the end of last year was sold to Union Investment Real Estate, and the Platan shopping centre in Zabrze. The pace of change in green technology is clearly illustrated by LED lighting, which was not - until recently - able to produce the right colour quality. "One year ago," explains Renata Kusznierska, "tenants were complaining about the light quality. Jewellery stores could not display their products. Now LED technology has caught up. Jeweller W. Kruk now uses 100 pct LED lighting throughout all its new stores." The energy savings from LED lighting can also be quite large, since they don't only result from savings in lighting costs. "You can reduce costs by between 50 and 70 pct just by installing LED lighting. Traditional lighting produces extra heat and therefore requires extra cooling and ventilation," Ms Kusznierska explains. And still the advantages of LED lighting don't stop there. According to Krzysztof Brzyski, the technical director of Forum Gliwice, which was recently awarded its BREEAM In-Use at the 'Very Good' grade, not only is LED lighting six times more efficient than traditional lighting sources, but in the two years that the centre has been using such technology, out of 1,600 lights only one has stopped working. This in turn has helped the image of the centre, because it is simply better illuminated. "We could say that there is a 16 pct improvement in electricity consumption compared to what the architect foresaw six years ago in 2007," he explains. It's therefore unsurprising that CBRE Global Investors has - according to Paul Lensing, a sustainability consultant in the company - been working on replacing all of its lighting with LEDs in all the malls in its portfolio in Hungary, Romania and Poland. "Most of our centres will be BREEAM In-Use by the end of the year," he claims. But it is the electricity savings that are a major driver of the trend, says Renata Kusznierska of Savills: "Over the next ten to twelve years, the cost of electricity is projected to rise by around 70 pct. The whole industry needs to adapt as the operating costs grow. And there is a need to ?prepare tenants for the this," she explains.
But even so, the retail sector is only just beginning to go green. Ms Kusznierska admits that "out of the 380 shopping centres in Poland, only 30 have certification. There is lots of work to do." When asked why the sector seems so far behind, she replied: "There were plenty of centres built during the more prosperous times. Then there was no focus on costs. The industry is only just beginning to go green and now the technology is available, when in the past it was too expensive." According to Neinver's Cezary Kopij, now this technology is actually surprisingly cheap. The Factory Warszawa Annopol outlet centre was the first retail project to be BREEAM certified at the design phase. Despite mistakes that were made, such as redesigning the mall to comply with BREEAM standards after the building permit had already been granted, Cezary Kopij claims that the extra cost of complying with BREEAM only came to 0.5 pct of the total cost of the project: "We were prepared for 1 or 2 pct, but in fact it was less," he explains. But still the entire process was a steep learning curve for all the parties involved. The APA Wojciechowski architectural studio offered to work on the BREEAM assessment without extra charge in order to gain experience of the BREEAM process for certifying shopping centres. "It was a surprise for our assessor that we were the first BREEAM certificate at the design stage in Poland,"claims Cezary Kopij. Apsys, on the other hand, estimates the costs to be somewhat higher. "In the case of a new building, the extra costs of using ecological solutions involved in building an entire commercial project range from 1.5 pct to 5 pct of the total cost of construction. The period of their return, depending on the type of installation and the type of solution applied, lies somewhere between three to twelve years," explains Justyna Kur of Apsys Polska.
What are some of the green solutions that can be applied? Galleria Burgas, which was built by Globe Trade Centre in Bulgaria, is one of the few green malls in the region to buck the prevailing trend for adopting BREEAM standards and has instead opted for LEED certification. This was largely because GTC has other non-retail assets across the region for which it also uses LEED. "During the construction of Galleria Burgas, eco- and environmentally friendly building materials were exclusively used, coming mainly from the region. The paints, sealants and adhesives in the building are low in volatile organic compounds. The construction is very well insulated, and the building uses highly efficient heating, ventilation and air conditioning systems, as well as efficient lighting and electricity systems. A well-developed building management system (BMS) supports the energy management and controls the work of the systems in the building," says GTC's Vasilena Petrova.

A matter of hygiene
Unfortunately, it seems that some tenants "are ambivalent to these changes in the sector. "In our experience retailers are not primarily concerned with occupying green-standard buildings," explains Marcus Wild, "if a centre is performing well, going green isn't necessarily a priority. Tenants do, however, require state-of-the-art facilities, and in this respect sustainability is indirectly relevant and impacts the entire image of a shopping centre. Retailers want locations in shopping centres that enjoy a good public image. Sustainability is an essential prerequisite. In psychological terms, going green can be considered as a so-called 'hygiene factor' that - in a positive sense - hinders the growth of dissatisfaction, but doesn't actually contribute to or result in satisfaction. These factors often remain unnoticed or are considered a matter of course. If, however, these factors are not present, it is considered a failing. It is the same with a shopping centre. The retail partners are less concerned about the operating details considered as prerequisites for tenancy." When it comes to adopting BREEAM standards themselves, tenants seem far from enthusiastic, as is well illustrated by Factory Warszawa Annopol: "We have a certificate for the whole building. So we suggested to our tenants that they get their fit-out certified too, but only one or two companies were interested," explains Neinver's Cezary Kopij. Paul Lensing of CBRE Global Investors also admits that tenants are not keen on undergoing certification. "I'm not sure if tenants see the upside of the BREEAM In-Use Part 3 scheme, where it is necessary to renew the certification every year. Tenants don't see the need to certify themselves yet," he explains, blaming this situation partly on the way that BREEAM has previously been very strongly focused on office tenants, which means that the certification process still requires further development in order for it to more accurately reflect the needs of the retail market.

Not only for offices
However, Renata Kusznierska of Savills is adamant that so-called "green leases" are essential for the proper functioning of a green-certified building. "You can build a green shopping centre, but if it is not used properly, it does not bring down costs. You have a sustainable building with unsustainable tenants," she says. But Ms Kusznierska does believe that the situation is improving and that tenants are beginning to demand green certification for their stores. "Sometimes it is the case that the building is not prepared so the tenants are unable to get certification and pass the assessment," she says. Apsys, too, has noted an improvement in the way tenants approach green issues. "From our observations tenants are increasingly paying attention to ecological solutions, both in new buildings and in pre-existing ones," says Justyna Kur of Apsys. However, she too has noted some adverse features of the certification process. "The certificate itself, when first created, was based on buildings that functioned as offices, which you can still feel, and this can cause some difficulties at the certification level. It doesn't mean that the certificate is in any was less effective when applied to shopping centres. The main difference between an office and a retail building is related to the tenants: in a shopping centre the tenants are varied, they run different types of businesses, which occasionally leads to difficulties providing an exact analysis of all the processes required for certification. The solution to this question is the continual improvement of the certification procedures, so that they better suit the usage and specifics of a given property," Justyna Kur explains.
According to the 'Retail: Going Green in CEE' report recently published by Jones Lang LaSalle, Unibail-Rodamco is one of the most avid green mall developers, with its Centrum Chodov in Prague achieving the highest score for a BREEAM In-Use shopping centre in the CEE region. It claims that around 5.5 pct of shopping centre stock has achieved some form of green certification across the CEE region, with the vast majority of such schemes being in Poland. This Polish lead is set to continue, because there is a further 140,000 sqm gla that is currently undergoing certification, while in the Czech Republic this figure is just over 120,000 sqm. Paul Lensing of CBRE Global Investors agrees that Poland is the clear leader in terms of green certification for malls: "Polish retailers have a different mindset. They are more developed and educated in regard to these issues. Poland is the more mature market. The further east you go the less this is so," he says. But obviously, the word 'mature' is a relative term when so few centres are currently certified. "It is new for all of us and we are learning," says Neinver's Cezary Kopij, "we are at the very beginning in Poland."