Long Term Sustainability and Asset Management

17th February 2022
Over recent years there has been an increasing focus on sustainability for all organisations, with shopping centres being no exception. With renewed emphasis on Zero Carbon, climate change, ESG (Environmental, Social and Corporate Governance) particularly since Cop-26 last year, how do these affect retail asset management?

Says Director Graeme Jones: “Sustainability is very much linked to long term investment and business planning within shopping centres and has to be considered as an increasingly important factor within the successful management of retail assets. It is not something that can be bolted on as a quick ‘green’ fix.”

Graeme explains that in the short term, there are clear and obvious initiatives that can be implemented quickly. For example, Sovereign Centros has recently fitted solar panels to Metrocentre in Gateshead that will see a reduction in grid dependency by 30% and offsets more that 37% of its own total annual electricity use with its own supply.   Sovereign Centros asset management team continue to ensure all their centres under management  work to maximise recycling and avoid waste to landfill.

However, at a time of dramatically increasing utility prices, the need for properly targeted leasing strategies and an increasingly sharp focus on investment returns, sustainability often has to take somewhat of a back seat.

Much comes down to the amount of investment that there has historically been in shopping centres. Simon Phipps, Senior Leasing & Asset Manager, explains that modern retail assets or those that have received good levels of investment will be in a far better position to incorporate environmental practices, whereas older centres where there has been little or no spending on improvements, will struggle to hit any ESG targets.

He says: “We are already starting to see the differential gap between the best performing and worst performing shopping centres widening. We believe this will continue and there will be a process of natural selection.

“Those shopping centres operating in areas where there have been good levels of investment – not just by the landlords but also the local authorities – will thrive. Centres such as Touchwood in Solihull, Metrocentre, Gateshead and One Stop Shopping, Perry Barr are all excellent examples of this approach. Not only are they generating good returns for investors but are also perfectly placed to meet the changing needs of customers.”

Graeme Jones adds: “As we move into an age where we’re starting to experience a scarcity of resources, it’s about looking after what we have as well as maximising both the short and long term returns from assets.

“Looking ahead, there will be added pressure from the Government and shareholders to make shopping centres more sustainable. Indeed, some investors are now closely looking at the environmental credentials of assets. At the same time, with advances in technology including air source heat pumps, green roofs, photo voltaic panels, solar panels and wind turbines, there will be many tools in the ‘sustainability tool box’ that can be used to reduce costs while embracing the ESG agenda.

“However the current reality is that investors will prioritise a short to medium term business plan which delivers strong returns for them over the delivery of sustainability initiatives unless those initiatives can produce appropriate returns and cost savings to enhance and support the overall performance of the plan.