Meeting carbon targets may cause property prices to rise, say experts

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In a jam-packed episode of PropCast, Blackstock Consulting’s Andrew Teacher discussed turnover rent, location decision-making with AI, the office market, and the environment with two experts in property: Malcolm Frodsham and Andy Martin.

You can listen to this podcast via Apple Podcasts or Spotify or SoundCloud or listen to it through the player below:

PropCast: The Property Podcast · #123: Meeting carbon targets may cause property prices to rise, say experts

While meeting COP26 targets is a key concern for much of the property industry, Malcolm Frodsham, who led research at Investment Property Databank and is a director at Real Estate Strategies, warns that doing so could have the unintended consequence of causing prices to rise.

“What worries me is that we are not as an industry physically capable of doing this amount of work in time, and that means pricing is going to go up,” he explains.

But, as many in the industry have accepted, there isn’t an alternative. Andy Martin, a prolific advisor and former CEO of BNP Paribas Real Estate Advisory clarifies: “Green buildings are achieving premium prices. If you want to do a deal with a large institution from Europe you’re going to have to show that it’s green. They won’t invest otherwise.”

The pair also discussed turnover rent. This is where a retailer is charged a percentage of their income as rent rather than a fixed sum - meaning retail property is valued based on its performance, rather than an estimate of its market value.

Frodsham thinks there are advantages to turnover renting because the market value of a property can be hard to calculate. Market values “may come from a property that’s not on the same street, or even in the same town”, he says, because slow areas won’t have leased any comparable properties recently enough.

Turnover renting also results in “the most amazing, rich data-series you can imagine,” says Frodsham, because it involves businesses telling landlords the exact profits they make from each property. This data can be used to show planners which shops work well with others.

At the same time, this takes enormous computing power, so tools are needed like Placemake.io, which uses AI to tell businesses where they should open up shop, or investors where they should be targeting next.

Martin explains that these tools allow retailers to maximise the value of their properties by turning huge amounts of data into actionable insights.

In the future, he continued, “you’re looking at placemaking as being a big theme. If you can change a place, and have more input into the trading scenario – and you can create a place which is operating 7 days a week – then you should create more value.”

You can listen to this podcast via Apple Podcasts or Spotify or SoundCloud or listen to it through the player above.

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#121 Desire for profitability is the ‘biggest problem’ for sustainability finance, says alstria

Meeting carbon targets may cause property prices to rise, say experts

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