WEBVTT - Building Performance, Next Asset Value 0:00:00.280 --> 0:00:04.480 Financial markets can no longer ignore the impacts of climate change, 0:00:04.559 --> 0:00:10.600 shifting consumer expectations and increasing regulatory scrutiny. These forces are 0:00:10.680 --> 0:00:16.280 reshaping industries, redefining risk, and creating new opportunities for long 0:00:16.400 --> 0:00:22.119 term value creation. Through conversations with industry leaders, investors, and 0:00:22.320 --> 0:00:27.480 subject matter experts, we explore where sustainability is translating into 0:00:27.880 --> 0:00:33.919 measurable financial outcomes. Welcome to Sustainability Currents, brought to you 0:00:33.960 --> 0:00:36.360 by Bloomberg Intelligence. 0:00:40.760 --> 0:00:45.600 Commercial real say is facing growing pressure from rising insurance costs, 0:00:45.760 --> 0:00:50.680 more frequent extreme weather, and increasingly stringent building performance standards. 0:00:51.080 --> 0:00:55.680 As these pressures affect operating costs, financing, and asset values, 0:00:56.080 --> 0:01:00.240 investors are paying closer attention to how buildings perform their 0:01:00.240 --> 0:01:04.680 full life cycle, not just energy efficiency, but also resilience 0:01:04.800 --> 0:01:09.240 and long term asset performance. Today we'll discuss how building 0:01:09.280 --> 0:01:13.480 performance is measured, which metrics matter most to investors, and 0:01:13.560 --> 0:01:17.560 where resilience investment is reshaping the economics of the built environment. 0:01:18.160 --> 0:01:21.480 Joining me today is Brando Wheeler, director of operations for 0:01:21.640 --> 0:01:24.280 bram USA. Briannau. Welcome to the show. 0:01:24.480 --> 0:01:26.360 Thanks so much for having me our pleasure. 0:01:26.640 --> 0:01:29.360 So perhaps we can kick off with setting the stage 0:01:29.800 --> 0:01:33.119 for listeners who may be less familiar with BRAM, could 0:01:33.120 --> 0:01:36.640 you briefly explain what it is and the role that 0:01:36.720 --> 0:01:39.479 plays in today's commercial real estate market. 0:01:39.920 --> 0:01:43.720 Yeah, sure so. So BRIHAM was the very first green 0:01:43.760 --> 0:01:48.800 building certification program we launched in nineteen ninety and we 0:01:48.840 --> 0:01:52.840 are completely about building science, right, So the certification initially 0:01:52.920 --> 0:01:58.480 was about understanding how buildings were performing against you know, 0:01:58.560 --> 0:02:03.200 kind of the star of sustainable development. But ultimately what 0:02:03.320 --> 0:02:07.880 brand certification does now is provide transparency on sustainability risks 0:02:07.880 --> 0:02:12.120 and opportunities at the asset. So developers or owners measure 0:02:12.160 --> 0:02:16.079 their asset or project's performance against the standard and certification 0:02:16.160 --> 0:02:20.040 provides the transparency to their stakeholders about that performance. So, 0:02:20.080 --> 0:02:23.080 in development, it reflects the developer's decisions made during the 0:02:23.120 --> 0:02:26.760 design process and during construction of the asset that ultimately 0:02:26.919 --> 0:02:30.480 set the performance trajectory of that asset. In operations, for 0:02:30.600 --> 0:02:33.480 existing assets, it reflects the asset as built and how 0:02:33.520 --> 0:02:37.120 it's being operated. And for renovations or fit outs, it 0:02:37.160 --> 0:02:39.600 reflects the extent to which the work is optimizing the 0:02:39.639 --> 0:02:43.359 asset to continue to perform or improve performance over time. 0:02:44.080 --> 0:02:48.600 So Bram's ratings really allow a wide performance spectrum anywhere 0:02:48.600 --> 0:02:51.560 from the highest performance achievable in a building for our 0:02:51.560 --> 0:02:54.920 current time to projects that have incorporated sustainability maybe on 0:02:54.960 --> 0:02:58.960 a smaller scale. All those projects represent risk and opportunity, 0:02:59.320 --> 0:03:02.840 and the certification can inform investors, owners, and future buyers 0:03:02.840 --> 0:03:04.079 about the asset itself. 0:03:04.520 --> 0:03:08.040 Thank you. That's helpful to hear, and perhaps a bit 0:03:08.080 --> 0:03:11.520 telling too, would be to talk a little bit on 0:03:11.639 --> 0:03:15.240 market evolution. So one trend we've been following is that 0:03:15.400 --> 0:03:20.200 resilience is showing up in many different conversations, from insurance 0:03:20.560 --> 0:03:26.000 and financing to building performance standards and physical climate risk. 0:03:26.639 --> 0:03:30.560 I'm curious how that compares with what you're seeing directly 0:03:30.840 --> 0:03:34.240 from clients. You know, what are the biggest changes maybe 0:03:34.280 --> 0:03:38.200 you've seen in the conversations you're having over the past 0:03:38.240 --> 0:03:38.840 few years. 0:03:39.320 --> 0:03:43.960 Yeah, resilience has been a really interesting topic and one 0:03:44.040 --> 0:03:48.560 which even maybe six five, six years ago was seen 0:03:48.600 --> 0:03:52.240 as quite niche. And so the focus has really changed. 0:03:52.320 --> 0:03:55.840 I mean operational energy efficiency and buildings. You know, that's 0:03:55.880 --> 0:03:58.960 been that conversation has been going on since the nineteen seventies, 0:03:59.200 --> 0:04:03.280 and even with that understanding, over all this time, it's 0:04:03.320 --> 0:04:07.160 really been a slow adoption right. The importance on operational 0:04:07.280 --> 0:04:10.480 energy efficiency really has varied depending on where we've been 0:04:10.480 --> 0:04:13.920 in the energy cycle. Basically, it was a tolerable waste 0:04:14.000 --> 0:04:17.520 as long as energy prices were acceptable. You know, Assessing 0:04:17.560 --> 0:04:20.400 physical climate risk has gone from that niche practice to 0:04:20.440 --> 0:04:23.160 mainstream really in just the last five years. It's been 0:04:23.200 --> 0:04:27.479 an incredible adoption rate. It's been helped by the accessibility 0:04:27.520 --> 0:04:31.640 of tools that help interpret those complex concepts like climate 0:04:31.680 --> 0:04:35.960 scenarios and asset level exposure to hazards. But really it's 0:04:36.000 --> 0:04:37.920 because the last five years has seen the realities of 0:04:38.000 --> 0:04:42.200 climate change with extreme weather events hitting asset value. Real 0:04:42.320 --> 0:04:46.080 estate is ultimately a risk management business, right, Understanding what's 0:04:46.120 --> 0:04:49.000 going to impact the income over the whole period and 0:04:49.120 --> 0:04:53.159 ultimately that determines asset value at exit. Climate risk is 0:04:53.200 --> 0:04:55.479 really something that can be understood and acted on to 0:04:55.480 --> 0:04:59.440 protect that assets value over time. So the last three years, 0:04:59.520 --> 0:05:01.839 you know where the hottest on record, and the summer 0:05:01.839 --> 0:05:05.320 of twenty twenty four, some eighty percent of Americans experienced 0:05:05.400 --> 0:05:09.200 a climate change enhanced emergency, so extreme heat, extreme cold, 0:05:09.640 --> 0:05:13.720 wind events, and wildfires, and we're really seeing that that 0:05:13.839 --> 0:05:17.120 widely shared lived experience has helped real estate owners and 0:05:17.120 --> 0:05:20.760 investors understand that this is having and will continue to 0:05:20.800 --> 0:05:23.560 have real impacts, and they need to prepare to protect 0:05:23.600 --> 0:05:25.560 their assets value for the longer term. 0:05:26.120 --> 0:05:28.599 And so you know, you touched on I think some 0:05:28.760 --> 0:05:33.200 of the key economics here where physical risk is you know, 0:05:33.279 --> 0:05:38.000 hitting asset value. I'm sure too though that when it 0:05:38.040 --> 0:05:43.640 comes to economics like those, changing priorities even ultimately influence 0:05:45.200 --> 0:05:48.760 where owners choose to invest. So for investors, the important 0:05:48.839 --> 0:05:53.520 question is you know whether those investments produce measurable financial 0:05:53.560 --> 0:05:59.760 benefits risks. So where are building owners seeing that you know, 0:05:59.760 --> 0:06:05.720 the strongest financial return from improving building performance and resilience. 0:06:06.200 --> 0:06:10.360 So it's it's an interesting time, right. So energy efficiency, 0:06:10.520 --> 0:06:14.640 operational energy efficiency was always you know, it always paid 0:06:14.839 --> 0:06:17.360 on some level. The question was how long would it take? Right? 0:06:17.920 --> 0:06:23.960 And so now the combination of energy affordability and availability 0:06:24.440 --> 0:06:27.599 has come to the to the forefront. And that also 0:06:27.680 --> 0:06:30.760 is twinned with resilience as a whole. So the resilience 0:06:30.800 --> 0:06:34.920 of our grids, the ability to you know, protect our asset, 0:06:35.000 --> 0:06:38.760 and these these things are all intertwined. Right, So the 0:06:38.880 --> 0:06:43.440 energy availability and affordability question really has brought this to 0:06:43.520 --> 0:06:47.640 a critical point, and it means that operational energy efficiency 0:06:48.480 --> 0:06:50.680 is you know, coming much more to the force. So 0:06:51.400 --> 0:06:54.719 you know, whereas once getting access to energy was considered routine, 0:06:54.800 --> 0:06:57.880 we now have many markets where demand well outstripped supply 0:06:58.400 --> 0:07:00.679 and that's leading to long wait times to get connection 0:07:01.240 --> 0:07:05.279 for development that costs money. Right, Utilities are just not 0:07:05.640 --> 0:07:08.560 ready to support that demand that's coming through. So on 0:07:08.640 --> 0:07:11.880 a lot of places, prices arising and that's really improving 0:07:11.880 --> 0:07:17.040 the payback calculation on energy efficiency and energy costs are 0:07:17.080 --> 0:07:19.640 starting to hit tenants hard and they're starting to look 0:07:19.640 --> 0:07:22.960 for spaces that reduce their operating costs. Real estate owners 0:07:22.960 --> 0:07:26.400 can offer at least building level operational energy efficiency, whether 0:07:26.400 --> 0:07:29.160 they're triple at least or managing the asset directly as 0:07:29.160 --> 0:07:32.640 a way of attracting and retaining tenants. In many ways, 0:07:32.680 --> 0:07:37.480 operational if energy efficiency actually is becoming a resilience issue, 0:07:37.760 --> 0:07:43.239 because when you have an efficient building, you're also building 0:07:43.280 --> 0:07:47.440 resilience into that asset. You're hardening that asset against extreme 0:07:47.480 --> 0:07:52.760 weather events. You are also being able to create environments 0:07:52.800 --> 0:07:55.880 in which when we have extreme weather events, the people 0:07:55.920 --> 0:08:00.320 inside those buildings can stay safe. Right. So it's it's 0:08:00.360 --> 0:08:03.119 interesting to see that the intersection of these two things 0:08:03.160 --> 0:08:06.720 happening and actually seeing that operational energy efficiency plus the 0:08:06.760 --> 0:08:10.240 more traditional things we think about resilience are actually pulling 0:08:10.280 --> 0:08:12.800 together to say. When we're talking about kind of looking 0:08:12.800 --> 0:08:16.280 at the bigger picture of how can we make buildings 0:08:16.280 --> 0:08:20.640 more resilient, they're intertwined, they're all together, and when you 0:08:20.720 --> 0:08:24.040 do those different projects together, Really we're talking about from 0:08:24.040 --> 0:08:26.560 a cost perspective. A lot of this is focused on 0:08:26.600 --> 0:08:30.640 insurance costs. We know insurance premiums have gone up in 0:08:30.680 --> 0:08:35.719 a lot of cases that has really impacted NI and 0:08:36.120 --> 0:08:40.480 asset value. How do we manage that in a changing climate. 0:08:41.280 --> 0:08:45.320 Focusing on the energy efficiency the asset plus the additional 0:08:45.360 --> 0:08:49.440 resiliency elements that can protect that asset can help manage 0:08:49.440 --> 0:08:53.200 those insurance costs over the longer term. Again, this is 0:08:53.200 --> 0:08:56.400 a risk management business, right, and insurance is ultimately a 0:08:56.520 --> 0:09:00.920 risk management project. It's all about understanding those risks and 0:09:00.960 --> 0:09:05.640 taking the calculated steps forward. Some of the bigger players, 0:09:05.679 --> 0:09:07.839 you know, where you have large assets, so you can 0:09:07.840 --> 0:09:10.599 actually spread risk in different ways. You can be strategic. 0:09:12.160 --> 0:09:13.920 That's going to be good, they're going to be okay. 0:09:14.040 --> 0:09:17.240 But really the insurance costs come to folks who can't 0:09:17.280 --> 0:09:20.160 spread that risk in different ways. They're exposed to hazards 0:09:21.040 --> 0:09:24.520 that they can't they can't mitigate, So how are they 0:09:24.520 --> 0:09:26.840 going to manage that over the longer term. That's a 0:09:26.880 --> 0:09:29.800 really big part of it. But you know, it's interesting 0:09:29.800 --> 0:09:32.880 that the answer that we've had for forty years continues 0:09:32.920 --> 0:09:35.120 to be a really critical one. When you create energy 0:09:35.160 --> 0:09:39.040 efficient buildings, you also create more resilient buildings along with that. 0:09:39.040 --> 0:09:43.240 That's helpful to hear, and I think you know clear 0:09:43.320 --> 0:09:45.960 of how it's impacting not just operating costs, but the 0:09:46.040 --> 0:09:50.800 insurance element. I think we tend to discuss these topics 0:09:50.840 --> 0:09:54.679 though at a market level, but they could be easier 0:09:54.720 --> 0:09:59.600 to understand through real world examples so much more specific. 0:10:00.240 --> 0:10:04.200 Can you perhaps share an example where the BREAM framework 0:10:04.559 --> 0:10:10.040 meaningfully influence perhaps a client's investment decision or even the 0:10:10.120 --> 0:10:13.000 long term performance of an asset. Yeah. Sure. 0:10:13.440 --> 0:10:18.320 So many of our clients are using brand certification as 0:10:18.400 --> 0:10:22.440 a process for kind of getting their house in order right, 0:10:22.520 --> 0:10:28.559 to position the assets, and really to understand where these 0:10:28.559 --> 0:10:32.320 assets are starting from today, right, getting the understanding of 0:10:32.360 --> 0:10:36.880 the sustainability risks and opportunities that are there, and for 0:10:36.960 --> 0:10:40.720 a lot of buildings, shocking. I know, lots of owners 0:10:40.720 --> 0:10:43.280 don't have a lot of information about it, right. They 0:10:43.360 --> 0:10:46.440 have some basics that come from a property condition assessment 0:10:46.480 --> 0:10:49.360 that's conducted in a two week due diligence period, right, 0:10:50.440 --> 0:10:52.679 and you know, you can learn a lot of information 0:10:52.760 --> 0:10:56.240 from that, but ultimately you have to understand what you 0:10:56.320 --> 0:10:59.760 own and what the reality of that is on the ground. 0:10:59.840 --> 0:11:03.360 So we've worked with a lot of clients who are 0:11:03.440 --> 0:11:06.920 kind of kind of starting from the basics of filling 0:11:06.960 --> 0:11:10.559 in data gaps that they should have just for everyday performance, 0:11:10.640 --> 0:11:14.480 let alone for sustainability. Right. So this process can provide 0:11:14.520 --> 0:11:19.400 really a structured way to gather documentation. It needs to 0:11:19.400 --> 0:11:22.760 be gathered, validated, and submitted as part of our process, 0:11:23.320 --> 0:11:26.840 and it really helps them get those assets into position 0:11:27.920 --> 0:11:31.080 to be able to manage going forward, right, really understanding 0:11:31.080 --> 0:11:33.360 what the what the basics are, and then to be 0:11:33.440 --> 0:11:38.560 able to bring in improvement plans. So our process requires 0:11:38.600 --> 0:11:42.600 not only documentation, but we have a really rigorous certification 0:11:42.679 --> 0:11:46.680 process which includes an assessor trained and licensed by vary 0:11:47.200 --> 0:11:51.040 to verify that performance on site. So you know, getting 0:11:51.040 --> 0:11:53.800 all that together, that initial certification for many of our 0:11:53.800 --> 0:11:57.400 clients is about you know, understanding, okay, where we now, 0:11:57.480 --> 0:12:01.440 let's go get that building building and improvement plans, let's say, 0:12:01.840 --> 0:12:06.200 on top of verified data and information. And that's really critical. 0:12:06.520 --> 0:12:08.520 So in the last couple of years we've published case 0:12:08.559 --> 0:12:13.520 studies with Newvene EQT real Estate and axi im Alts 0:12:13.800 --> 0:12:19.120 which is now BMP Pariba, where they've described how BRIM 0:12:19.160 --> 0:12:21.880 has really helped them understand the performance and set their 0:12:21.920 --> 0:12:26.079 improvement pathway for the future to deliver value. And I 0:12:26.120 --> 0:12:28.679 think one of the most exciting things about this is 0:12:28.720 --> 0:12:33.320 that we are not talking super high performing assets right now, 0:12:33.960 --> 0:12:36.280 right like, this isn't about the super shiny things. These 0:12:36.280 --> 0:12:39.320 are about really buildings that reflect a lot of our 0:12:39.400 --> 0:12:42.160 current building stock, which is that they may be on 0:12:42.160 --> 0:12:45.400 the lower performance scale, but there are absolutely ways that 0:12:45.440 --> 0:12:49.400 they can move forward, that they can improve and actually 0:12:49.679 --> 0:12:53.360 drive value through that process. So sustainability, I think for 0:12:53.400 --> 0:12:55.400 a long time was thought about is something that you know, 0:12:55.440 --> 0:12:58.199 we do for high performance assets already. You know, it's 0:12:58.240 --> 0:13:00.800 kind of like given the high five to but that's 0:13:00.800 --> 0:13:03.559 not where the risk sits. So for those clients, I think, 0:13:03.600 --> 0:13:06.400 particularly in those case studies, it was a great demonstration 0:13:07.040 --> 0:13:09.360 of how they were looking at this as you know, 0:13:09.520 --> 0:13:15.280 how sustainability can really help drive that value wherever this 0:13:15.480 --> 0:13:17.000 asset's performance sits. 0:13:17.480 --> 0:13:20.000 Exactly what I wanted to kind of dive in next. 0:13:20.520 --> 0:13:24.200 I mean, one challenge the industry faces is that most 0:13:24.240 --> 0:13:28.640 of like tomorrow's building stock has already been built, but 0:13:28.720 --> 0:13:32.560 new constructions only part of the equation. And you know 0:13:33.440 --> 0:13:36.959 you spoke already a ton on this, But what are 0:13:37.120 --> 0:13:43.720 clients prioritizing I guess when deciding how to retrofit existing assets. 0:13:45.160 --> 0:13:47.480 So the two things I think that are the most 0:13:47.520 --> 0:13:50.240 immediate or kind of what I mentioned before, so cost 0:13:50.640 --> 0:13:54.720 you know that certainly is sharpening pencils on the efficiency side, right. 0:13:55.600 --> 0:13:58.680 The other eye is to regulation for existing buildings. So 0:13:58.960 --> 0:14:03.040 you mentioned, you know, around building performance standards. So we've 0:14:03.040 --> 0:14:07.280 seen retrofits to reduce energy usage. It's been particularly active 0:14:07.440 --> 0:14:11.280 in those jurisdictions with building performance standards. But we're also 0:14:11.360 --> 0:14:17.440 seeing particularly national owners really looking at where building performance 0:14:17.440 --> 0:14:22.680 standards may emerge, or even using building performance standards as 0:14:22.800 --> 0:14:26.120 a framework for all of their assets to think if 0:14:26.120 --> 0:14:30.080 a building performance standard came in, how would this asset perform? 0:14:30.360 --> 0:14:32.640 I mean, you know, as of twenty twenty four, about 0:14:32.640 --> 0:14:34.920 twenty five percent of all buildings in the US were 0:14:34.920 --> 0:14:38.520 covered by a building performance standard, and there's many jurisdictions 0:14:38.520 --> 0:14:43.840 that are still considering rolling them out. So for clients 0:14:43.840 --> 0:14:47.480 who are thinking about that regulation, they're thinking about also 0:14:47.600 --> 0:14:50.800 resilience and the hazard exposure that they have and needing 0:14:50.840 --> 0:14:55.480 to mitigate or manage that risk. What we're seeing with 0:14:55.520 --> 0:14:58.720 retrofits is actually bringing those two things together. What are 0:14:59.000 --> 0:15:02.360 interventions or changes that can be made where energy and 0:15:02.400 --> 0:15:07.560 resilience intersect. So high efficiency buildings, you know, cutting cutting 0:15:07.640 --> 0:15:12.920 energy use that can also need that mean that you know, 0:15:13.000 --> 0:15:17.000 backup solar or solar powered battery systems can be smaller, cheaper, 0:15:17.080 --> 0:15:21.920 and run longer during extreme events. Those all provide value 0:15:21.960 --> 0:15:25.720 in the asset and in aggregate. When buildings reduce energy 0:15:25.920 --> 0:15:30.040 demand and participate in demand management programs, it decreases stress 0:15:30.040 --> 0:15:32.320 on the grid and helps avoid blackouts which have those 0:15:32.320 --> 0:15:36.320 wider economic consequences. So we're really seeing the twinning there 0:15:36.480 --> 0:15:39.880 thinking about how can solutions do more things? What are 0:15:39.920 --> 0:15:42.640 the co benefits? I mean, find me a solution that 0:15:42.840 --> 0:15:47.560 reduces energy usage, you know, delivers additional resilience and protects 0:15:47.600 --> 0:15:49.920 occupant health and well being, and you've got a business 0:15:49.920 --> 0:15:53.360 case winner, so really looking for the solutions that do 0:15:53.480 --> 0:15:57.040 all of those things. And I think you know, certainly, 0:15:57.080 --> 0:16:02.800 given with the acute events, there's been a focus rightly 0:16:02.880 --> 0:16:06.880 so around life safety and comfort that has come in. 0:16:07.000 --> 0:16:10.280 You know, for real estate, ultimately we're a building's business, 0:16:10.280 --> 0:16:13.040 but we're also about people, right, It's really about occupants 0:16:13.080 --> 0:16:15.000 for a lot of it. How do we ensure that 0:16:15.040 --> 0:16:19.800 people stay safe during these events? You know, efficient buildings 0:16:20.120 --> 0:16:23.800 that can maintain reasonable internal temperatures mean that occupants can 0:16:23.920 --> 0:16:26.280 shelter in place right as long as the building structural 0:16:26.360 --> 0:16:30.040 integrity is maintained. And I mean this is really critically 0:16:30.080 --> 0:16:33.640 important for multifamily but also for commercial properties too. Right, 0:16:33.720 --> 0:16:37.880 people's productivity is damaged, particularly by extreme heat, so it 0:16:37.960 --> 0:16:40.960 increases fatigue, gets so those reaction times, and it raises 0:16:40.960 --> 0:16:44.920 the rate of mistakes. That's a business issue. So you know, 0:16:44.960 --> 0:16:47.360 bringing all of those two things together, we need to 0:16:48.120 --> 0:16:51.160 we need to start fortifying our buildings for the climate 0:16:51.200 --> 0:16:53.120 that we have in the future and really the one 0:16:53.120 --> 0:16:56.600 we're facing right now, just for it to maintain the 0:16:56.720 --> 0:17:00.160 value over that time. And there's a lot of building 0:17:00.200 --> 0:17:04.119 stock that really needs that help. So, you know, the 0:17:04.160 --> 0:17:06.040 way we look at it is like it needs to 0:17:06.080 --> 0:17:09.480 be about all buildings everywhere. How do we move those 0:17:09.520 --> 0:17:13.159 all forward? How do we you know, keep them uh, 0:17:13.520 --> 0:17:16.320 you know, keep them focused or the ownership focused to 0:17:16.359 --> 0:17:18.919 keep moving those forward? And how do we provide a 0:17:18.960 --> 0:17:22.160 means of measuring that that is really you know, science 0:17:22.200 --> 0:17:25.040 based and delivers value over the longer term. 0:17:25.440 --> 0:17:29.240 And I guess that would just again stem from the 0:17:29.280 --> 0:17:35.080 growing importance of consistent, comparable data like uh, you know, 0:17:35.480 --> 0:17:42.439 obviously investors increasingly rely on that building performance information when 0:17:42.480 --> 0:17:45.879 they're evaluating assets, but not all data is created equal. 0:17:46.320 --> 0:17:50.879 And you mentioned the bit on the importance behind having 0:17:51.720 --> 0:17:55.199 you know, some kind of data to derive insights. You 0:17:55.240 --> 0:17:58.560 can't manage what you don't measure, the famous saying that 0:17:58.600 --> 0:18:02.600 everyone likes to be used the you know, obviously brain 0:18:02.640 --> 0:18:09.880 emphasizes third party verification. But like, why is independent building 0:18:09.920 --> 0:18:14.520 performance data so valuable for building owners and for investors? 0:18:15.920 --> 0:18:19.320 It's a great question. You know, we start at kind 0:18:19.320 --> 0:18:22.280 of the basis of building science, right, So our organization, 0:18:22.440 --> 0:18:24.320 be Area, is a one hundred plus year old building 0:18:24.320 --> 0:18:28.239 science research organization, and you know, we're the first to 0:18:28.240 --> 0:18:30.520 say there are a million different ways that you can 0:18:30.520 --> 0:18:35.320 measure performance, But ultimately what is meaningful What can you 0:18:35.560 --> 0:18:40.440 not only understand but influence and change as an outcome. 0:18:40.760 --> 0:18:40.960 Right. 0:18:41.359 --> 0:18:43.160 We often talk about this in the difference like when 0:18:43.160 --> 0:18:46.560 you have an existing building, most people can't change the 0:18:46.560 --> 0:18:50.360 walls unless you're going to do a major you know, retrofit. Right. 0:18:50.800 --> 0:18:52.840 So you got the asset that you have, how can 0:18:52.880 --> 0:18:57.040 you optimize within it? Within that? Right? So for us, 0:18:57.080 --> 0:18:59.320 the first thing is establishing what are the what are 0:18:59.320 --> 0:19:02.680 the data points that matter? How does it have impact? 0:19:03.320 --> 0:19:06.080 So you know, for example, you know we've talked about 0:19:06.160 --> 0:19:11.520 energy efficiency. Really energy efficiency is important, but ultimately from 0:19:11.600 --> 0:19:14.399 an impact perspective, it's about how much carbon is produced 0:19:14.400 --> 0:19:16.760 from the from the energy that goes with that, right. 0:19:17.280 --> 0:19:22.560 So you know operational energy FREEMS recognized operational carbon emissions 0:19:22.640 --> 0:19:25.600 in our standards right from the beginning because science told 0:19:25.680 --> 0:19:28.200 us that's where the impact was going to be. So 0:19:28.240 --> 0:19:32.800 we focus on looking at the metrics that really matter 0:19:33.400 --> 0:19:37.760 and that are measurable and end can be and can 0:19:37.800 --> 0:19:42.600 be changed or influenced right through through changes in management. Okay, 0:19:42.720 --> 0:19:46.760 so real estate is ultimately about managing risks, right in 0:19:46.880 --> 0:19:49.199 order to manage those risks. One, you have to understand 0:19:49.200 --> 0:19:51.520 what the risk is and the data that underpins that 0:19:51.520 --> 0:19:54.160 that's going to tell you. So again narrowing it down 0:19:54.200 --> 0:19:56.200 from the billion and one things that you can measure 0:19:56.320 --> 0:19:59.679 down to the things that really matter. But the independence 0:19:59.760 --> 0:20:02.280 of that data, right, Like you said, not all data 0:20:02.400 --> 0:20:07.600 is the same, and it's really important for investors to 0:20:07.800 --> 0:20:11.640 be able to trust the information that they're being given. Right, 0:20:11.720 --> 0:20:14.760 do they trust that the risks are being managed and 0:20:14.800 --> 0:20:18.920 that the performance is as they are being told? And 0:20:19.119 --> 0:20:21.000 I think we're in very much a trust but verify 0:20:21.119 --> 0:20:24.960 kind of society, right that comes behind this. So Briham's 0:20:25.040 --> 0:20:28.480 process is really building on that. We take it a 0:20:28.520 --> 0:20:32.960 step further through requiring the on site visit, right because 0:20:33.600 --> 0:20:35.719 you know, it's not just what's shown on paper but 0:20:35.840 --> 0:20:39.800 actually backed up what's seeing on site. And you know, 0:20:39.920 --> 0:20:41.920 I mean any owner can tell you, you know, when they've 0:20:42.080 --> 0:20:44.639 purchased something, and they may walk in and there's always 0:20:44.640 --> 0:20:48.040 a surprise, right. I don't think there's any real estate 0:20:48.560 --> 0:20:50.439 owner and manager in the business who hasn't had at 0:20:50.520 --> 0:20:53.720 least one of those in their career. So the independence 0:20:53.760 --> 0:20:57.919 of the assessor from the owner and even from bre 0:20:58.359 --> 0:21:02.000 really makes them the independent third part verifying the performance achieved, 0:21:02.080 --> 0:21:04.359 so you know, it's not just what's set on paper, 0:21:04.400 --> 0:21:07.720 but it's actually what's going on in the assets. And 0:21:07.760 --> 0:21:10.160 it's important to note right, most assets in the building stock, 0:21:10.240 --> 0:21:13.200 like I said, are not high performance buildings. That adds 0:21:13.280 --> 0:21:16.159 risk to the asset, but that doesn't make it uninvestable, 0:21:16.880 --> 0:21:19.160 and in fact, one could argue that actually the more 0:21:19.560 --> 0:21:22.600 you know brown quote unquote a building is the more 0:21:22.760 --> 0:21:26.840 desperately it needs that investment. Right. The key is providing 0:21:26.880 --> 0:21:29.920 the transparency of the extent of the risks and opportunities 0:21:30.240 --> 0:21:33.560 and allow the investor to make an informed decision. Being 0:21:33.600 --> 0:21:38.080 really clear on the critical metrics to measure is part 0:21:38.119 --> 0:21:39.760 of that, and that's where we come at this from 0:21:39.800 --> 0:21:43.760 a science base. Trust the science to define those metrics. 0:21:43.800 --> 0:21:48.200 Gotcha, And I'd love to touch on AI now if 0:21:48.200 --> 0:21:51.880 that's okay. You know, on our side, we've spent quite 0:21:51.880 --> 0:21:56.800 a bit of time just researching AI infrastructure, particularly around 0:21:57.119 --> 0:22:03.560 the how water, power and cooling all play in this space. 0:22:03.640 --> 0:22:09.160 And as data centers become larger, more resource intensive, they're 0:22:09.200 --> 0:22:13.400 introducing a different set of design and operational challenges that 0:22:13.600 --> 0:22:18.960 I would say traditional well compared with traditional commercial buildings, 0:22:19.000 --> 0:22:24.080 and so would be great to hear from conversations you've had, 0:22:25.000 --> 0:22:27.879 even perhaps some of the certificates you guys were able 0:22:27.880 --> 0:22:33.080 to issue using BREAM, Like, how are those trends changing 0:22:33.240 --> 0:22:38.200 the way clients maybe think about designing and just overall 0:22:38.200 --> 0:22:39.600 operating data centers. 0:22:40.560 --> 0:22:41.960 Yeah, it's a great one. I mean, it wouldn't be 0:22:42.000 --> 0:22:44.720 a conversation if we didn't bring up AI at this point, right. 0:22:45.160 --> 0:22:47.479 It's a really I mean, it's a really exciting space, 0:22:48.119 --> 0:22:55.560 and this is interestingly presenting us some really incredible challenges 0:22:55.640 --> 0:23:01.679 in thinking about resource management and availability. I mean, there 0:23:01.760 --> 0:23:05.200 was always the theoretical, you know, reaching a limit of 0:23:05.280 --> 0:23:08.320 what we have available, and data centers have kind of 0:23:08.480 --> 0:23:12.199 brought that into into reality. Certainly on energy, we're already 0:23:12.200 --> 0:23:18.360 experiencing it, and I think the fears around energy limitations 0:23:18.359 --> 0:23:21.160 of energy availability are coming kind of into the water 0:23:21.240 --> 0:23:24.240 sphere now. You know, let's start with water though, because 0:23:24.240 --> 0:23:26.760 I think this is a really big one. You know, 0:23:26.760 --> 0:23:29.000 there's been some pretty wild estimates out in the media 0:23:29.000 --> 0:23:32.520 about how much water data centers consume. Ye as if 0:23:32.520 --> 0:23:34.720 that consumption would be uniform no matter where the data 0:23:34.720 --> 0:23:37.360 centers are built. So you know, I mean I've been 0:23:37.440 --> 0:23:39.359 I've been working in the data center sector for at 0:23:39.440 --> 0:23:44.679 least two years now. I'm helping develop our standards and 0:23:44.760 --> 0:23:49.000 updata standards around data centers and you know, and I 0:23:49.200 --> 0:23:51.880 work with a number of operators we have, we've issued 0:23:51.920 --> 0:23:55.119 certificates for data centers for over ten years. And I 0:23:55.119 --> 0:23:58.800 think what's interesting there is, like the miss that's being 0:23:58.840 --> 0:24:00.800 made is that really, when I comes to water, the 0:24:00.840 --> 0:24:03.560 critical thing to consider is the cooling strategy that's being 0:24:03.640 --> 0:24:07.240 used because that's where the water consumption comes in. And 0:24:07.680 --> 0:24:12.600 that cooling strategy is very different climactically. Right. This isn't 0:24:12.640 --> 0:24:14.679 a one size fits all where we're throwing up the 0:24:14.680 --> 0:24:17.520 same building whether we're building in Phoenix or you're building 0:24:17.520 --> 0:24:21.160 in the Great Lakes area, Right, So there is absolutely 0:24:21.200 --> 0:24:27.080 a potential to be consuming millions of gallons of water. 0:24:27.119 --> 0:24:32.320 That's absolutely possible. But practically speaking, most data center developers 0:24:32.400 --> 0:24:35.479 are now installing closed loop systems which do not use that. 0:24:35.800 --> 0:24:37.920 And that's not just in water stressed areas. That's in 0:24:37.960 --> 0:24:42.040 a lot of different areas. There is a challenge around refrigerants. 0:24:42.119 --> 0:24:45.080 We can't be blind to the fact that refrigerants aren't 0:24:45.119 --> 0:24:49.639 necessarily benign as their impact, but it is not necessarily 0:24:49.680 --> 0:24:52.960 the water stress that's there. And I think I think 0:24:53.000 --> 0:24:56.399 a lot of data center operators are very conscious of 0:24:56.960 --> 0:25:00.440 partly because the energy the energy limitations that are now 0:25:00.440 --> 0:25:03.240 being hit, really conscious of what happens if you don't 0:25:03.240 --> 0:25:08.520 have that. Those are critical material, uh significant issues, right, 0:25:09.119 --> 0:25:14.160 So what transparency is not not present at the moment, 0:25:14.160 --> 0:25:16.439 and I think that's stirring a lot of fears about 0:25:16.480 --> 0:25:19.920 what does this mean? And we should be concerned. I mean, 0:25:19.960 --> 0:25:23.040