When is a City of London office building also a West End workplace? GPE thinks it has solved this riddle with its approach to embedding the circular economy in its schemes.
Around 40% of the steel used in its 180 Piccadilly project, W1, will originate from its demolition of 2 Aldermanbury Square, EC2, where the REIT is building a new 320,000 sq ft ESG-focused office. As part of the approach the company is salvaging steel from its projects to reuse either in its portfolio or in the wider industry.
There is much to play for in the race to make office developments as green as possible. According to JLL, sustainable office buildings achieve an average capital value premium of more than 20% compared with other stock, and an average increase in rents due to BREEAM certificates and improvements in EPC ratings of 11.6% and 4.2% respectively.
GPE says few other real estate firms in the capital have adopted as innovative or widespread an approach to recycling and retrofitting.
But the race is not a sprint, it’s a relay, and the company says it has learnt lessons that could benefit the wider industry around partnership – with customers and competitors, as well as colleagues within its business.
Different conversations
This is one initiative that did not just go from the boardroom to the building site. The need for more sustainable solutions has proved vital for GPE in securing the best occupiers and maintaining good relationships with its customers.
One such example was with law firm Clifford Chance, which signed a deal to prelet the entirety of 2 Aldermanbury Square from GPE in November 2022.
The firm was “insistent that we had at least a five-star NABERS rating” according to GPE’s sustainability and social impact director Janine Cole.
A key condition of the deal, which sees the law firm preparing to leave its home at Canary Wharf’s 10 Upper Bank Street, E14, in 2028, was that its new home hold top sustainability credentials across the board – a stipulation which required the landlord to manage expectations and a consistent dialogue between developer and occupier.
“That’s been an interesting journey with them, helping them to understand that it’s not all for us and it’s not all within our gift to deliver. This is very much a partnership and we’ve got to come together,” says Cole. “We’ve got to give you the right building that runs efficiently, but we need you to run it efficiently once we finish.”
In fact, the steel swap programme became a selling point for the law firm, to help attract and retain talent.
“It’s a very different conversation now. There’s more evidence that sustainability is an employee retention issue and that people want to work for an employer that takes these things seriously,” GPE’s director of projects, Helen Hare, tells EG.
“[Clifford Chance] loved the fact that we were taking the steel out of 2 Aldermanbury Square and were going to be using it somewhere else,” says Hare. Not only did the company tell its employees the story of the steel reuse in its new headquarters, it also started to talk about social impact and started making inquiries about wider initiatives it could get involved in.
These green issues have cross-pollinated the portfolio, with ESG and sustainability requirements being built into major investment deals, such as the sale of 50 Finsbury Square, from the outset.
For assets to achieve the desired “greenium” factor, investors and developers need to transform under-loved offices into buildings that surpass expectations and are capable of achieving top returns on investment.
Sometimes, this requires a deep retrofit, as was the case at 50 Finsbury Square. GPE’s first net-zero carbon building, the project included stripping and reusing the existing steel, and repurposing some of the exterior stone into figurines to feature in the reception.
“We’re very much thinking about a circular economy at that [site] as well, and it played into the story when we came to sell the building because the fact that it was net zero carbon was a key requirement. In the contract of sale, we had to prove that we delivered it to the Net Zero Carbon Buildings Framework,” says Hare.
This helped GPE sell the freehold of 50 Finsbury Square for almost 60% more than it paid for the site when it bought it from Deka in 2016. It offloaded the freehold for £190m to a wholly owned subsidiary of private German family office Wirtgen Invest Holding in October 2022.
Competing but collaborating
Although the industry’s drive to reach its own and nationwide sustainability targets has pushed it to be better, the amount of input needed to affect significant change is vast and requires collaboration, the GPE team says.
In July 2023, GPE teamed up with the Crown Estate to exercise their collective power to redevelop two office buildings at French Railways House and 50 Jermyn Street, in St James’s, SW1.
As part of the agreement, the new headlease across both buildings will be for 129 years at 10% of rents received, and GPE will redevelop the sites into 66,800 sq ft of grade-A offices, plus retail and restaurant space. Planning for the Make Architects-designed scheme was granted in 2022.
“Some of the smaller buildings you have in Westminster tend to lend themselves more to that retrofit process”, says Hare. And this “collaborative approach made such a difference to the negotiation with the Crown”.
The partnership has embedded ESG requirements into the agreement and aims to help both parties pool resources, implementing circular economy principles in a way that betters their respective portfolios.
This includes keeping the existing foundations and basement, as well as the reuse of structural steel. In this instance, all roads lead back to Aldermanbury, as the steel being reused for the project has also come from the deconstruction of that site. In doing so, it is aiming to lower carbon emissions by up to 99% compared with procuring new steel.
It does not always prove easy to share in an industry such commercial real estate, even less so with direct competitors. Finding a way to maintain a business’ competitive edge while also harnessing the power of cross-company collaboration is a delicate balance but is pivotal for progression.
“I’d be lying if I said that there wasn’t a degree of competitiveness amongst us while sustainability was concerned,” says Cole. “But we all accept the way in which the industry moves on, learns and starts to up its game is by sharing this kind of knowledge. And our team internally has spent an awful lot of time talking to our peers around what we’re doing and how we’re doing it.”
“I’ve never spent so much time with our peer group,” Hare seconds. “We’re all in this together and I think we all share that common view that we’ve got to move at speed. We can only move at speed if we share the knowledge.”
But just as change does not happen in a vacuum, it does not happen in one fell swoop, especially where collective systemic change is required. It requires patience, proactivity and consistency.
“You are talking about changing the practices of a whole industry, and that’s not going to happen overnight. If you’d asked me 10 years ago, I would have said it wouldn’t have happened in my career lifetime,” says Hare.
“With technology we’ve got the ability to share and process quicker, but we all need to contribute to the data and the benchmarking to enable things to move forward quicker.”
Own it
GPE says it has long prioritised sustainability and environmentally friendly approaches to construction.
“GPE has always done retrofit,” says Cole, referencing the company’s project at 160 Old Street, a refurbishment that melded some new elements with the majority existing structure at the site.
She adds: “The way GPE has always worked is it will take the asset and go, ‘OK, what do we have here? What is good? What would be good to retain?’ And we have always started from that perspective.”
By taking this approach it hopes to have embedded sustainability in the minds of employees across the business, so that ESG becomes a natural part of the planning, construction and build process, company-wide. This is something that Cole hopes to see even more of.
“One of my proudest moments at this business is the fact that I had nothing whatsoever to do with the paper that came in to executive committee from Helen’s team to ask for money to go to the steel reuse scheme. It was all entirely pulled together by the project management team,” she says.
“It was their idea; it was their project and they’re delivering it. And from a sustainability perspective, that is where we need to get to. We need to do all sustainability professionals out of a job. That’s got to be the end game because it should just be part of what we do. It’s got to be about integration.”
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