05 December 2014

Improving energy efficiency of retail sector is a commercial necessity

The UK government aims to reduce carbon dioxide emissions by 80% by 2050, and it is clear that the retail sector has a strong contribution to make.

Creating the right sales environment has historically always been synonymous with extensive, and typically inefficient, energy use – from large open doors pumping out heat or air conditioning onto the street, to open fridge units and lights left on for 24 hours a day. According to Retail Week, the UK’s 40 largest shopping centres annually consume over £40m in energy.

At the same time, the challenges faced by society around energy affordability, security of supply and reducing carbon emissions – known as the energy ‘trilemma’ – have become increasingly stark.

The UK government has ambitious targets to reduce carbon dioxide emissions by 34% by 2020 and 80% by 2050. Given that the British Retail Consortium estimates that the sector represents about 5% of the UK’s GDP and 10% of its employment, it is clear that the retail sector has a strong contribution to make.

"Consumers are increasingly making choices based not just on the quality of a product but on how businesses are run and the values they stand for.”

Paul Clark, Director of Investment

Thankfully, there are reasons to be optimistic. Retailers, manufacturers and their landlords are increasingly recognising the importance of bringing down their own costs in an increasingly competitive market, but also that their performance across environmental and social indicators is more than ever tied to their overall commercial success.

For progressive landlords, creating world class retail, or indeed office, destinations is only one part of a much wider picture. Consumers are increasingly making choices based not just on the quality of a product but on how businesses are run and the values they stand for. For property owners and occupiers, this means long-term commercial success is intrinsically linked with sustainability. The Carbon Trust estimates that a 20% reduction in energy costs represents about the same as a 5% increase in retail sales.

Large-scale real estate businesses and institutional investors, capable of progressing the kind of at-scale regeneration we have been undertaking in London’s West End, have a unique opportunity to future-proof their properties. For example – including the installation of cutting-edge fuel cells to use ground source heat pumps.

However, learning lessons and applying the thinking that is transforming the sustainability of traditional urban retail offerings, to retail parks out-of-town, is proving challenging for the sector but progress is being made.

Units are often poorly insulated, with gaping shop doorways left open and big car parks that tend to be relied upon by consumers, rather than public transport. For developers and landlords of the next generation of retail parks, the design stage of a scheme offers the opportunity to shape the sustainability of a shopping destination for years to come.

Our MK1 shopping park in Milton Keynes, for example, is the first in the UK to receive a BREEAM excellent rating, whilst for existing parks, solar PV, cycling facilities, promoting car sharing schemes and using open space for biodiversity projects are all initiatives that can also deliver big wins.

Even so, while it’s important to have bold targets, such as the BREEAM ratings, and use innovative technology, there has to be a focus on outcomes and the broader sustainability impacts of a building, such as how well it serves the wider needs of its local community.

We can have all the technology in place and certificates, but without understanding how a building is performing and how retailers engage their customers, we won’t know whether a development is working and what might need to change.

Landlords with a long-term outlook should be looking to three year post-occupancy evaluations on all new developments and refurbishments to assess and steer a building’s performance against the original design stage targets.

Ultimately though, we’ve got to be much more ‘human’ in how we approach energy efficiency, which is as much about culture and behaviour as it is about technological innovation. This can be challenging as with innovation comes complexity, and it is becoming increasingly clear that buildings will not perform to their potential without an on-going partnership between property owner and occupier. This can present a challenge for designers – how to ensure that the buildings they design are usable.

For this to happen effectively, it needs everyone – from facilities managers to shop managers – to work more closely together, so operational requirements are better understood and acted upon.

The bottom line for property developers and landlords like us will be whether we continue to attract the best retailers into the long term, as they seek to grow their businesses at the same time as reducing their costs and carbon emissions.

Improving the energy efficiency of our buildings therefore is not an option but a commercial necessity; and success will depend as much on a ‘cultural’ shift towards collaboration with tenants, as it will on technological solutions.

Paul Clark, Director of Investment & Asset Management

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