Benoy + Pragma Futures discussion - The New Sustainable Retail Experience

Across Asia and Europe, retail is facing a perfect storm of ​“clicks, covid and climate”. The rise of online purchasing, accelerated by the pandemic, has hit in-store retail hard. In the UK, current retail stock needs urgent improvement to meet energy performance criteria, while in Asia retail tenants are also grappling with efficiency issues. As developers in both EMEA and APAC assess the challenges before them, one thing is clear: retail needs to act now to secure a more sustainable future.

To kick off the UK session, Mike Wilson-MacCormack, Director at Benoy, spoke of the major oversupply of retail and the challenge developers face regarding redundant assets. ​“Demolish and rebuild or retain and repurpose?” he asked, outlining the environmental implications of each option, before urging participants to consider the most sustainable way forward.

Peter Barker, Senior Asset Manager at APAM, responded by quoting Leo Tolstoy, who famously remarked that ​“everyone thinks of changing the world, but no one thinks of changing themselves.” One of the principal challenges, explained Barker, is that while everybody wants retail to be more sustainable, very few people are willing to commit the time, effort or money required to make it happen. 

What’s needed, said Barker, are different ways of funding projects, whether through expanded private sector roles, bigger pension funds, or government-led interventions to stimulate investment in sustainable retail. 

Paul Eldred, Partner at Gardiner & Theobald, concurred, adding that the initial costs involved in enhancing sustainability performance is money well spent. ​“If you can improve your ESG scores on a job,” said Eldred, ​“then funding is generally cheaper, people are more willing to invest in it and tenants are happy to pay more rent on those buildings.”

According to Doug Higgins, Projects Director at Socius, ​“forward-thinking investors” are prepared to the take the risk on environmentally friendly schemes. Such investors, he said, are willing to justify ​“a green premium” on the costs ​“in order to see a green premium on the values”. 

Participants also reflected on the need for increased legislation. ​“Retail hasn’t always prioritised U‑values and sustainability,” said Eldred. What’s needed now, he suggested, is ​“legislation around improving existing stock”. 

Perhaps developers should look to the commercial office sector, where according to David Richards, Director at Atelier Ten, ​“in the last 12-to-24 months carbon has become…as important a currency as money”. With many tenants ​“unwilling to go into a building if it doesn’t hit the right ESG criteria”, commercial developers are now linking management bonuses to the carbon performance of their projects. 

In this way, the commercial market is getting ahead of government intervention, with levels of detail – for example, around embodied carbon analysis – being driven ​“far more by owners and occupiers than by legislation”. Might this attitude and approach, wondered Richards, ​“start to happen in the retail sector”, with positive change being stimulated by demand rather than regulation? 

In order to make meaningful strides towards sustainability, participants agreed that retail projects need to have performance targets embedded into business plans from the beginning. ​“Whether it’s net zero carbon and operation,” said Doug Higgins, ​“or net zero embodied carbon, or net gain and biodiversity,” targets have to be included, ringfenced and protected from day one. 

In addition, the use of data to help quantify these targets is critical. As Isabelle Hease, Head of Product/​CEO at Visitor Insights, observed, the availability of data is really helping ​“to move the tanker” and change investor mindsets by demonstrating quantifiable returns and value. 

Data is also critical to shaping what Simon Wainwright, Director at Burro Happold, called a ​“science-based approach” to the debate on sustainability. Only through conversations underpinned by data and science can we help decision makers achieve understanding and consensus around ​“climate change, ESG and targets”, establish what’s practical and attainable, and ​“get everybody on the same page with an affordable agenda”. 

During the session, participants discussed a number of the core defining features of sustainable retail developments. These included projects that, in the words of Madeleine Hug, Senior Associate Director at Benoy, ​“enable genuine connection to landscape, context and community”. A long-term vision and a rich mix of uses were also highlighted as critical. As Toby Comerford, Founder of Beacon Retail Consulting, observed, retail developments have to offer ​“something for everyone and a reason to be there”. Which means that when we talk about retail, we’re really talking about ​“mixed-use”, with the standalone, monocultural retail model a thing of the past. 

To achieve these goals, developers need to forge strategic partnerships with local authorities. As Rob Bentley, Director at Benoy, remarked, local authorities ​“can borrow [at lower rates] and lever money off other sites to help create overlapping value”, which in turn enables the development of vibrant, mixed-use town centre schemes. Because a sustainable future depends upon the ​“footfall generators” of retail, residential, workplace, education and health all working together – as opposed to the ​“tumbleweed-generators” of single-use shopping centres and business districts that close at 6pm. For design and architecture professionals, the challenge is to support and drive the strategic visioning so local authorities can, as Bentley concluded, ​“cut through the politics and make [it] happen”. 

The Singapore session began with opening remarks from Wesley Louie, Head of Design at Benoy in Singapore. Louie framed the day’s discussion by asserting that, given the environmental pressures we face, sustainability can no longer be ​“swept under the carpet”; it’s something ​“designers and developers have to address”. 

Across Singapore and Asia, one of the major sustainability challenges for retail is how to break out of the airconditioned, brightly-lit box format while providing thermal comfort and convenience for shoppers. Not only are these airconditioned interiors highly energy intensive, they’re also out of step with people’s post-Covid behaviours and preferences. In the wake of the pandemic, there’s renewed urgency around access to sunlight, greenery, open air and space. 

According to Henry Woon, Director at Atelier Ten, requirements for outdoor space are becoming increasingly prominent in shopping mall designs and retailer feedback, with ​“the yoga movement and lifestyle-based retailers” driving an expansion of outdoor retail areas. ​“Indoor-outdoor space is definitely a [growing] trend,” added Woon, while the integration of renewable energy sources, natural lighting and ventilation will be key to creating more sustainable retail models in the region. 

To support these spatial shifts, Kabi Subramaniam, Associate Principal at Arup, proposed that ​“there’s a need to think about flexibility and adaptability” in retail design, enabling the creation of retail structures that can easily transform into other forms of uses, such as residential, medical or workplace. It’s an approach that is vital in markets such as China and Australia, where, as Benoy’s Terence Seah observed, urban density demands a blending of uses and spaces. It also reflects the increasingly flexible patterns of modern living, while allowing for future repurposing, which obviates the need for asset demolition.

Joining the Asia roundtable remotely, Alex Avery, CEO of Benoy’s sister company, Pragma, highlighted ​“the difference between consumer understanding and emphasis on sustainability” in the East compared to the West. In China, for example, said Avery, ​“sustainability from a retail perspective is not yet a strong consumer agenda…[and is] driven more by policy, government and global organisations”. Conversely, in the UK and US, as discussed at the London roundtable, ​“it’s actually being very strongly driven by consumers”.

Several participants observed how, at a corporate level, Chief Financial Officers in Asia have suddenly become interested in sustainability. But this, it was noted, is more about ​“ticking the box”. Whereas organisations used to go for gold in feasibility studies, nowadays they’re prepared to go for platinum. This shift is partly in response to financial regulations, but is also driven by the fact that organisations can access cheaper loans if they meet sustainability criteria. 

However, consumer attitudes in the region are beginning to change, particularly among the younger generations. As Chang‑D Choo, Asset Manager at Hongkong Land, observed, younger consumers are becoming more informed about social and environmental issues, which is driving increased expectations around sustainability performance. ​“I think it’s at a tipping point,” said Choo, with the agenda beginning to evolve and young people really ​“pushing for it”, prompting ​“retailers [and] companies to look at sustainability”. 

As in the UK session, participants also discussed the fact that funding models need to change to enable investment in sustainable retail. In particular, it was observed that current models are not geared to support the flexibility and adaptability required to drive sustainability. So in the UK and Asia-Pacific, financial metrics and mechanisms, as well as design schemes and structures, need now to adapt to help build a greener future.