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Retailers Buy In To Green Brand: ICSC Scorecard Tailored to Mall Sector

December 11, 2014
 

Savvy consumers know the value of a good bargain and a great product. Now retailers themselves are shopping around to show customers their social conscience.

 

Largely inspired by the green success of the commercial property sector, retail stores and shopping centres are seeking green building certification and adopting new investigative methods, energy incentive programs, corporate sustainability programs and benchmarks to cut costs, build their green brand and attract a powerful customer base.

It’s hard to find a new office building in a city centre today that isn’t labelled a green building since clear and simple green building labels create a shared language. Tenants know what to ask for and landlords know what to deliver.

As a result, programs like LEED, BOMA BESt and GRESB (Global Real Estate Sustainability Benchmark) have been widely adopted. Notably, Bentall Kennedy, Oxford Properties, and Brookfield Properties have all been identified as North American leaders through the GRESB program. Likewise, the Real Property Association of Canada’s (REALpac) energy and water benchmarking programs have made an impact as benchmarks enable properties to improve their sustainability performance.

Now, green building labelling is extending to the retail sector. Starbucks has built 452 cafes to achieve LEED. Chipotle Mexican Grill boasts the first ever Platinum LEED certified restaurant (alongside a stock price of $600, up from $60 in 2009). First Capital Realty has 37 BOMA BESt-certified retail properties and TD Bank set itself apart in 2011 with the first ever net-zero energy bank.

Of the 1,100 newly constructed Canadian buildings that are certified LEED-NC (New Construction), 165 are retail properties. The last few years have also seen rapid uptake of a performance-based program for existing buildings (LEED Existing Building: Operations & Maintenance).

More than one hundred LEED-EB certifications, and an additional 270 projects registered and pursuing LEED-EB across the country, are showing that buildings of every age can compete. Although there are not yet any certified LEED-EB retail properties, a number of retail properties are currently pursuing this designation.

Efficiency & Sustainability Measures

In retail, rising costs have to be offset with an increase in sales to obtain the same profit. Alternatively, costs can be reduced through greater efficiency.

Small retailers may be especially vulnerable to rising utility costs so efforts to manage consumption can make a real difference in their ability to do business. Energy conservation is often the focus, but water and waste efficiency improvement may become more relevant as costs of these utilities rise.

To identify energy-saving opportunities, some retailers are turning to investigative methods such as recommissioning. Unlike energy audits, which typically focus on costly retrofits, recommissioning looks at building operations to identify energy and cost saving opportunities.

A recent survey by Lawrence Berkley National Laboratory found that recommissioning at 643 new and existing buildings discovered more than 10,000 energy-related problems. When corrected, these led to an average savings of 16% with a payback period of just over a year.

First Capital Realty is one such retailer that sees the value of this investigative process. The real estate company is currently implementing a recommissioning program to uncover low-cost energy savings at nine of its retail properties.

Retrofits, such as those facilitated by the Retail Council of Canada’s EnergyBright program, likewise offer straightforward savings. The EnergyBright program supports retailers of all sizes in accessing saveONenergy Ontario provincial incentives to achieve energy efficiency.

“Environmental sustainability has to factor into every business decision at the LCBO. Energy efficiency is a great example of that because that’s where we can have both environmental benefits and improvements to the bottom line,” says Patrick Ford, Executive Director Corporate Affairs with LCBO, which participates in the EnergyBright Program.

Even small retailers have seen immediate improvements to their electricity bills on the order of 25-30% savings after installing energy efficient lighting and equipment. And retrofits can be kept out of sight to create big wins with no impact on front-of-store operations and appearance.

Support for green retail is also coming from portfolio managers who are applying their in-house corporate sustainability programs to their retail properties. Cadillac Fairview overhauled its in-house GREEN AT WORK™ corporate sustainability program to require each of its properties to set and achieve conservation targets and follow best management practices for green building operations.

By 2013, the real estate leader had reduced energy use at its commercial and retail properties by 16% and water consumption by 28%. Properties also improved waste diversion by 10%, all compared to the company’s 2008 baseline year.
Similarly, Oxford Properties’ “Sustainable Intelligence” program has yielded a 12% improvement in energy efficiency across its portfolio since 2010, and 40% of the portfolio is now LEED certified.

Benchmarking Options

Like their commercial counterparts, retailers are turning to benchmarking tools such as Energy Star Portfolio Manager and the new International Council of Shopping Centres (ICSC) Scorecard to monitor and enhance their green pedigree.

The U.S. Environmental Protection Agency’s Energy Star Portfolio Manager enables retail properties including single stores, wholesale clubs and bank branches to benchmark and compare their energy efficiency to their peers on a simple 0 to 100 scale. Target is one retailer using this program to benchmark its stores and pursue high Energy Star scores of at least 75 for its American stores by 2015. The Institute for Market Transformation recently compared five separate studies and found that Energy Star-labelled buildings in the U.S. market consistently exhibited higher occupancy and higher value.

Early in 2014, the ICSC released a retail mall focused scorecard. Created “by landlords for landlords” of multi-store retail properties, the ICSC Property Efficiency Scorecard was devised to help investors, retail tenants and shoppers compare the green performance of shopping centres and retail mall locations.

Specifically, the Scorecard is intended to allow users to:

  • assess building performance including energy, water, recycling and waste, and green operations practices;
  • benchmark against other buildings in their portfolio and anonymously with peers;
  • receive suggestions for performance improvement specific to retail properties; and
  • produce performance reports that can be shared internally and externally.

Darryl Neate, the Director of Sustainability for Oxford Properties Group, says the tool provides the industry with a credible and accurate way to benchmark the sustainability performance of shopping centres “just like we have a credible tool and standard for measuring gross leasable area.”

One of the Scorecard’s most promising features is the ability to classify properties before they are benchmarked to peer groups. This is especially important in retail because shopping centres come in many shapes and sizes, with variations in structure, tenants, common areas, parking and energy billing.
This has typically made it difficult to properly compare one property to another. (Enclosed malls behave differently than open-air or hybrid properties, for example.)

ICSC reports that more than 1200 shopping centers are already using the Scorecard, although Canadian adoption has been somewhat slow. This may be due in part to the enrolment costs, which act as a barrier to those who want to test the Scorecard before committing. The current annual portfolio registration fee is a few thousand dollars, plus there is a per-building fee starting at a few hundred dollars, or less depending on the volume of buildings enrolled.

To date, many important features appear still to be in development. For example, users don’t receive any feedback or data outputs tied to the wealth of data collected on building classification and green building features using a survey of mostly yes/no questions.

Data quality may also be an issue. For example, mall energy use is being benchmarked against extreme peer ranges. (In one case, a mall using 23 kWh/ft2 of electricity was being compared to an ICSC benchmark range of 0.001 to 5289 kWh/ft2.) Ensuring quality data and making use of the extensive inputs collected will enhance the value of this tool once these features are developed.

While retail real estate managers may have different challenges and drivers than managers of other property types, it is likely that more and more of them will adopt the sustainability initiatives that have taken hold in the commercial sector and adapt them to their retail needs. A great brand and a great customer experience increases sales. When well-managed costs are added into the mix, profits should follow.

 

Contact:

Anna Melnik
Anna Melnik Sustainability Analyst
+1 416 644-0494, 272