It’s fantastic that we hear so much about the effort and investment channelled into energy efficiency, renewables and large-scale generation capacity, but what we don’t hear so much about is the timing of our energy demand. And it begs the question – when we look at decarbonisation and energy resilience, should we be focusing more on ‘when’, as opposed to ‘what’?
The cost and carbon intensity of our electricity varies significantly – often spectacularly – yet we seem to plan our effort and interventions around fixed rate carbon factors and traditional supply tariffs. The reality is in fact very different. In a single day, costs and carbon emissions can spike way above design benchmarks and plunge to negative levels, especially when regionalised carbon factors are considered. So, it’s clear there is much financial and enviromental betterment to be realised through shifting load away from peak periods.
This shift can be achieved through technology interventions such as storage, demand side response and smart appliances. At a domestic level there is huge scope to shift or flatten peak demands through behavioural change.
Cynics will rightly argue that the change this can bring about is immaterial at a holistic level. However, domestic power demand contributes around half of total energy demand, and given it is inherently discretionary and controllable, it begs the question as to what the aggregated effect would be if the adoption of storage, demand side response and smart appliances was more widespread?
Again, the cynics will quickly chime in with “why bother, doesn’t save me anything”, and to some degree they are right. But if you were to look at this differently, the net effect of wide-scale behavioural change could negate the need to invest in new generation assets, i.e. power stations, which are eye wateringly expensive.
So, I put it to you – if you could trim evening peak demand by say a quarter through the types of technology intervention I’ve mentioned above, it would reduce marginal generation demand by approximately 5GW. The true cost of 5GW of generation capacity is up to £35bn. What if some of this saving could be used to incentivise behavioural change? Roughly that translates to £1,500 per UK household.
It’s why it’s worth asking if some of the very well-intended and commendable effort and investment in decarbonisation and power resilience should instead be channelled towards ‘when’ not just ‘what’ our energy needs are.
For a decade or more, investment decisions in financial markets have been informed by environmental, social and corporate governance (ESG) criteria. The clever people who help make such decisions have long understood that ESG credentials correlate with long term financial performance. An active disclosure culture helps keep organisations ‘honest’. Multiple corporate scandals which resulted in eye watering drops in valuation we’re predicted by ESG screening. The net effect being, companies wanting to attract investment need to think and act more responsibly. This has helped pave the way for a new generation of more purposeful businesses, plus spawned the reinvention of several longstanding household names. In short, much good has come from the ESG revolution!
Meanwhile in Construction and Real Estate little has changed. We continue see myopic and single-minded approach to value creation and realisation. An industry famed for ‘smash and grab’ approach to value, realised by a fixation on capital cost, minimum compliance and adversarial conduct. Little wonder we are still faced with an industry crippled by a lack of resilience, innovation, solvency and skills.
So here’s the thing….. Intuition tells us social and environmental parameters do correlate with long term financial performance in Real Estate. Yes, we are lacking an evidence base to support this, underpin investment and help inform decision making. We are seeing institutional investors wanting to demonstrate social impact, whether reluctantly to placate responsibly minded pension savers, or because they see value. Either way, it is happening!
To effect real change and to deliver value there needs to be reliable screening guidelines which can steer responsible money on the right path. This is especially true in development. Designer are playing a multimillion-pound game of battleships, without an opponent! The desire to realise value on short term horizons is inconsistent with long term value and true social betterment. The challenge of predicting future social trends has never been more difficult, and important!
We need to work together to establish a reliable, evidence-based approach which gives weighting to ESG parameters, specific to Real Estate. Good data does exist for aspects such as; sales, leasing, occupancy, energy performance, use class, engineering, etc. Future change factors such as net-zero transition are being mapped out with increasing certainty. Social impact is being quantified with greater consistency. Corporate governance policies are widely disclosed. Once refined and aggregated this broad dataset would start to identify trends which could help guide decision making.
Data science based predictive analysis has revolutionised many industries (not to mention won elections and referendums against them odds!) Will it now be pivotal in enabling sustainable development in Real Estate?
Changing Retail Habits
In May 2007 internet sales accounted for 3.1% of all retail sales, in May 2020 they accounted for 32.8 % . Whilst this has dropped back slightly in the months after the first lockdown eased, internet sales still account for close to a third of all retail sales in the UK.
In addition, we know that since 2015 there has also been an overall decline in high street footfall of 5% (accounting for seasonal and other variations).
However, these trends don’t necessarily mean that all high streets are failing, rather it signifies their function is changing.
The impact of COVID-19
City centres were hardest hit during the first lockdown as all the people who typically visit city centres (employees, tourists, students and shoppers etc.) stayed away. Local high streets in contrast generally fared better. From 1st March to 30th June, district centres saw footfall drop by only 34.5% compared to a drop of 75.9% in city-centres over the same period.
With more people working from home, there is also evidence that footfall patterns have changed with people visiting high streets throughout the week and Saturday no longer being the busiest day. Similarly, many high streets have found they have less of a daily peak in activity at midday with more of an all day economy developing.
One recent study reported that 26% of respondents said they had re-discovered their local high street during lockdown, although 74% still wanted more reasons to visit and 69% say they would like to see physical improvements.
By way of illustration of this change, a retail manager from a district high street in Bristol was interviewed during the first national lockdown as part of a high street renewal project and noted;
“I know most of our regular customers… and I know we’ve seen a steady stream of new customers – people have realised the value of their local high street.”
Changing Patterns of Work
Even before the Covid-19 pandemic, long-term patterns of work were changing. For example, between 2008 and 2019, there was a 40% increase in the number of self employed people – meaning there were 5 million solo self employed people in the UK at the start of 2020.
In fact, solo self-employment has accounted for over a third of all employment growth since the onset of the financial crisis in 2008 with the evidence being, prior to the pandemic at least, that the solo self-employed had higher levels of job satisfaction, were more likely to report being happy and had lower levels of anxiety than employees
The flux of 2020 introduced many to flexible patterns of home working and during this period of economic shock there is growing evidence to suggest this led many to go it alone. For example UK business incorporations were up 30 per cent in the four weeks to mid-December compared with the same period last year, and the annual growth rate has been in double digits since June..
Perhaps not surprisingly then, in the years preceding the pandemic there was a trend towards flexible, co-working spaces. And, it wasn’t just freelancers and start ups utilising co-working spaces, 80% of senior executives in a 2018 study stated that they expected to make use of collaborative spaces in the next three years.
Industry commentators are now predicting the co-working model is likely to evolve out of the pandemic with one recent report predicting the;
“start of a shift by companies looking to new geographic locations to fundamentally change the way in which they distribute their workforce”
Towards Liveable and Sustainable Neighbourhoods
There is growing evidence that people increasingly want to live in neighbourhoods where services and amenities are nearby, not just housing developments. For example a recent survey undertaken by YouGov indicated that 71% of people think people should be able to meet most of their everyday needs within a 20-minute walk, cycle or local public transport trip from their home.
In Paris, Mayor Hildago recently announced an ambitious ‘la ville du quart d’heure’’ initiative – based on the concept that all city residents should be able to access the majority of their everyday needs within a 15 minute walk or cycle. It’s an approach that it is also gaining momentum in the UK and has now been adopted by the Mayor of London. The Mayor’s office explains;
“The 15 minute city concept invites us to imagine thriving local areas with easily accessible jobs and services; better street space and active travel; and greener more resilient communities”
To realise this vision will require new thinking about the type of land uses provided at a town and district level. This includes embracing higher density mixed-use development, including places to work, places to socialise and access to open spaces.
It also inevitably means rethinking how we design and manage our streets and public realm. Notably, the YouGov survey also indicated that 84% of people now view streets and roads as multi-purposed – enabling people to move around but also as places where people live and spend time.
There are also reasons to believe that our current model of transportation is changing. Data recently released by the DVLA suggests that driving is losing its popularity among younger people. Only 538,000 licenses are held by those aged 25, who number around 900,000 in total. By comparison, 54 year olds share 880,000 licenses among 937,000 people.
It is also worth noting that the government’s planned electric vehicle revolution is challenged by the fact that terraced streets without private driveways are commonplace across the UK and it will therefore require a fundamental rethinking of how we move around cities and allocate road space to achieve.
Relevant to this, is the emerging ‘Mobility as a Service’ model which has the potential to revolutionise how we travel away from private ownership of vehicles towards more of a pay-per-use approach. There are already a plethora of services available from multi mobility apps like Whim (currently used in the West Midlands), sharing apps for cars, bikes and e-scooters, services like Uber and Lyft, as well as car clubs and car subscription services.
Towards Multi-functional High Streets
These trends, when considered together, suggest it’s time to think again about the role and function of local high streets for the years ahead.
With new typologies of high streets emerging, there is a growing consensus that we need to nurture more multi-functional local high streets and district centres that address the multiple needs of local communities. This is likely to mean a greater diversity of uses and embracing new ways of doing things like community business models.
Although, it could also be argued that this is more about rediscovering mixed use high streets. Historically speaking high streets were characterised by a melange of activity, a place to buy and sell goods yes, but also where things were made, where people lived and could come together.
It is also worth noting that this approach of diversification is already embedded in The National Planning Policy Framework which advocates for allowing local centres;
“to grow and diversify in a way that can respond to rapid changes in the retail and leisure industries, and thus allow a suitable mix of uses (including housing) and reflect their distinctive characters.
However, with the pandemic acting as the catalyst for change, now is the moment for action to ensure high streets can emerge from this crises stronger and more resilient.