Blog by Daniel Mead, Head of Asset Management at Bywater Properties

"Anyone who follows our recent activities at Bywater will know that we have been busy with our development project, Paradise SE11 in Vauxhall, and have been on the acquisition trail in London and in Manchester, acquiring new opportunities for us to create best in class, low carbon workspaces for the future. We are also busy managing and leasing our existing buildings and I'll be sharing some insight into this over the next few months here on our thoughts page.

I have spent some time over the last few weeks checking progress of our asset management and leasing activities from a sustainability perspective. Green Leases is a hot topic once again on LinkedIn and CPD sessions across the UK this month, and is a great place for me to start!

Net Zero Carbon in Real Estate

As a response to the global climate emergency, the UK Government is committed to reaching Net Zero Carbon by 2050.

The real estate sector contributes 40% of all global Carbon emissions and we believe passionately that the solutions to our challenges as an industry lie in championing design and innovation; refurbishing where we can, building responsibly using low Carbon techniques where we can’t and always seeking expertise and excellence in everything we do.

At Bywater Properties, our whole team feels a sense of urgency around our responsibility helping to address the climate emergency.

The challenge facing the real estate sector in a nutshell is divided between Embodied and Operational Carbon and how these elements combine to make the Life Cycle Carbon emissions of projects.

We are already successfully approaching the Embodied Carbon challenge through the use of low carbon construction methods at all of our projects. At Paradise SE11 for example, we are using Mass Timber (CLT and Glulam) as a major part of the construction of a 62,500 sq ft office building to help achieve ground breaking Carbon results for new development.

Operational Carbon and Green Leases

As part of our Life Cycle Carbon strategy we have focused on making improvements in the way in which we approach reducing the Operational Carbon of our buildings.

We were an early adopter of Green Lease clauses, first at McLellan Works in Glasgow with Addleshaw Goddard where we refurbished and re-let the building during 2021-22 and then also more recently in pre-leasing drafting that we have been working on with Neil Sagoo and Scott Burn at Maples Teesdale LLP for our Paradise project.

The recent release of the Better Buildings Partnership Green Lease Toolkit was a welcome announcement as it gave us the opportunity to reflect on our own Green Lease work and review the progress that we have made.

It has been encouraging to learn that we match or surpass the benchmarks set out in the BBP Toolkit across our documents. There have however been lessons learnt, both in the comparison to the Toolkit and also in our own experience from using our documents.

Bywater Green Lease - BBP Tool Kit Benchmarking

The BBP Tool Kit has proven helpful as guidance for future work and in benchmarking the work that we have done to date.

I have used the table below as a simple checklist to match how our precedent documents fare against the BBP lease clauses and the light - dark green strength of each clause. Work in Progress is highlighted where we need to make improvements.

Bywater, BBP Green Lease Tool Kit Check List

I have been particularly pleased with the strength of our sustainability and in use clauses which promote energy use and recycling by the landlord team and amongst our tenants and also our equivalent of the the BBP Sustainability Group clause.

Green Lease - Service Delivery

Starting with a precedent Green Lease and agreeing one with your tenant is one thing, however its more important to deliver on the clauses set out in the documents!

We ran our first successful "Environmental Forum" for tenants at McLellan Works in February alongside Lambert Smith Hampton , Greengage Environmental Ltd and Petronella Tyson and plan to run further sessions for tenants later this year.

The Greengage session centred around educating our tenants on the Net Carbon Zero challenge we are facing together and made suggestions on how they can help with recycling and energy use management on site.

Lessons Learnt

At McLellan Works we have completed the majority of leasing transactions since refurbishing the building using our Green Lease, agreeing deals with tenants such as Experian , Cala Group Limited , Hoare Lea, Spencer Ogden and TELUS Health | TELUS Santé in the process.

Some of the conversations and negotiations that our leasing team - Fergus Maclennan, Meg Beattie, Caroline Coulter and Hannah Moore - have had have been challenging, occurring where some of the clauses have been viewed as “non-standard” by occupier teams. Whilst we haven’t had to choose between our environmental credentials and a tenant yet we have come close.

One key lesson learnt has been that we now front load the new green clauses at a much earlier stage clearly in our Heads of Terms to ensure that tenants and their legal teams have sight of these and can raise questions or concerns at the earliest opportunity, rather than during the heat of latter stage negotiations when patience is wearing thin and time is running out.

In terms of other lessons learnt, the BBP toolkit has helped highlight future improvements that we can make to our documents including the provision of a Social Impact Co-operation clause and extensions to Dispute Resolution clauses, areas that we haven't prioritised to date.

Future Improvements

As use of Green Leases becomes more prevalent across the real estate industry and landlords and tenants become more comfortable with them, we expect that our combined ability as an industry to consistently agree clauses at the "Dark Green" end of the BBP Tool Kit spectrum will improve.

This will be crucial in ensuring behaviours in operation of buildings by the landlord and tenant improve as the darker the green the clause, the more legally, and potentially financially, "biting" the consequences of non-compliance will become.

In terms of the financial side of Green Leases we have been exploring this at Bywater. As a complimentary project we are trialing a Bywater Green Pledge between parties designed to extend a combined commitment to delivering Carbon savings in our buildings beyond the development and refurbishment and leasing transaction stages.

The Bywater Green Pledge is voluntary to begin with and sits alongside our Green Lease, encouraging the adoption of sustainable behaviours. The Pledge recognises that there are varied parties involved in achieving our 2050 Net Zero Carbon commitment. We are currently trialing the Green Pledge and will provide an update on our progress in a future edition of this series".