In this fourth podcast of our program "Parlons Tertiaire", broadcast on Radio Immo on July 20, 2022, Chloé Rayssac and Bérénice Deville welcome Odile Batsere, CSR & Innovation Director at Société de la Tour Eiffel, and Benjamin Mercuriali, Founder of AEGILIM.
In this episode, we take a look at the "Décret Tertiaire" (French decree concerning the obligation to improve the energy performance of commercial real estate portfolio in order to achieve a 60% reduction in energy consumption by 2050, compared to 2010) implemented under the Elan law, and more specifically the operational part. This very recent subject raises many questions and concerns and we try to see a little more clearly in this podcast. We also speak about the OPERAT platform, the platform created to meet the requirements of this decree.
Have a good listen !
(Audio only available in French)
Bérénice Deville:
Odile, could you briefly introduce Société de la Tour Eiffel to us?
Odile Batsere, Director of CSR & Innovation at Société de la Tour Eiffel:
Certainly. Société de la Tour Eiffel is a tertiary real estate company with a portfolio of approximately 1.8 billion €, 25% of which is located in the regions and 75% in Paris. We manage around 70 sites, comprising about 200 buildings and accommodating 400 tenants. Consequently, we are primarily concerned with the tertiary decree.
Bérénice Deville:
Benjamin, could you provide a brief introduction to AEGILIM?
Benjamin Mercuriali, Founder of AEGILIM:
AEGILIM is a young consulting and service company, created with a focus on improving energy efficiency for tertiary buildings.
Chloé Rayssac:
In our previous podcast, we tackled a current topic: the ISR label and ESG criteria. Today, within the same theme, we'll be discussing the tertiary decree, specifically focusing on the operational aspects.
The aim of this podcast series is to delve into the world of real estate asset management, understand the daily challenges faced by professionals in the field, and openly discuss even the more challenging topics.
As you may have noticed, environmental issues are increasingly prominent in the news, not only in general but also in real estate, whether it's related to ESG criteria and the ISR label, or the tertiary decree.
As a reminder for those who might have missed it, the tertiary decree is part of the Elan law, which mandates a reduction in energy consumption within the French tertiary building sector. The goals are clear: to reduce energy consumption in buildings by up to 60% by 2050.
Since its implementation in October 2019 up to today, this topic has been at the forefront of discussions among real estate professionals. Numerous questions arise about the initial declarations on the OPERAT platform, a platform specifically created by ADEME to meet the requirements of the tertiary decree.
We've invited Benjamin and Odile today to help us gain better insight. Why did we choose to discuss this today? Bazimo might not specialize in energy consumption, but it does contain a substantial amount of general information and data that clients are using more and more to directly input data. We also engage in many exchanges with tenants to inform them about various matters such as building identifiers and energy usage shares. So, we wanted to address this topic with you today.
So, in theory, it's often said that energy information should be communicated to the tenants, and it's the tenants who should provide the data. However, we see more and more mandates being signed to make landlords handle everything on behalf of the tenants. The idea is to understand your experience today, how it's being implemented, and how you're working around this.
Odile Batsere:
Indeed, at Société de la Tour Eiffel, we're currently pursuing both approaches. We've been engaged with the tertiary decree for some time now, and together with Benjamin, we've clearly sensed the legislator's intention to place the responsibility of reporting on the tenant, or at least on the occupant. Presumably, this is because the occupant also has a role to play in reducing energy consumption. That's quite clear. As I mentioned earlier, we manage a portfolio of approximately 620,000 square meters with 400 tenants. We have major corporations, of course, but we also have many SMEs and micro-enterprises. These business owners might not necessarily possess the required expertise or motivation. They often have other concerns at the moment. Therefore, we offered our tenants assistance regarding the tertiary decree.
It's important to understand that we are now ready, thanks to the energy consumption data that Benjamin has provided us and the research work we've conducted. We are fully prepared to provide the energy consumption shares for each tenant. However, the property owner also needs to understand how the building functions, the consumer profile of the building. This is why we engaged in discussions with our tenants. We also have the advantage of being closely connected with our tenants, allowing us to offer them a dual proposition: either we send them their energy consumption share, or we report on their behalf.
Benjamin Mercuriali:
I believe that indeed there's a lot of delegation and a search for delegation happening. To follow up on what Odile mentioned earlier, it's somewhat similar to the tenants. You have around 20-25% of property owners who are aware that focusing on sustainability is also about defending their property's value. So, let's say there's a quarter of asset managers aiming for green value or green asset management. Of course, all of this requires investment - in terms of team, break-even points, and management decisions. Hence, there's a degree of cautiousness about how to convert these obligations into opportunities and whether it's really feasible. After all, we've been talking about green value for a few years now. Moreover, there are still a few skeptics who are currently capitalizing on the complexity of the regulation.
Furthermore, regarding the levels of delegation, what we often see today are requests for advice, in-depth explanations, often from high-ranking positions within organizations. These requests pertain to strategic decision-making. Additionally, there are substantial delegations related to reporting. However, these delegations ultimately require dialogue between landlords and tenants. If you delegate everything to AEGILIM, for example, I would take turns speaking on behalf of both parties to explain things. Moreover, there are different types of externalizations, which are essentially strategies for efficiency, employing asset managers' tools to address different issues step by step. The initial target to be achieved by 2030, for instance, involves setting up centralized technical management systems for buildings. Therefore, some actors are currently crafting a ten-year strategic plan to determine their course of action and check off regulatory boxes without overinvesting.
Lastly, achieving a 60% reduction in energy consumption in a building necessitates some level of renovation. It demands exceptional management, but in the end, it will require capital expenditures (CAPEX). The precise allocation of these CAPEX is also a matter of delegation. So, I haven't witnessed a complete delegation, especially by the same actors. What I can confirm is that there's a significant degree of delegation for one or more of the tasks I've detailed. Subsequently, there are varying organizational approaches in the real estate market, with players like fund-of-funds managers opting for outsourced asset management, while others have integrated management structures like Société de la Tour Eiffel. Each entity has adopted its own business model, so there's certainly a wide range of responses. Additionally, the level of delegation seems to be influenced by the focus on capturing value, whether it's through internalization or externalization, as well as the desire to retain that value in-house.
Bérénice Deville:
I would also add that having an internalized management approach is certainly advantageous when dealing with these issues. It gives us an added strength that you're well aware of - the aspect of data. So, our understanding of our assets is much better, undoubtedly.
Chloé Rayssac:
One last word or message to conclude?
Bérénice Deville:
I would say not to forget that the ultimate goal of the tertiary decree is to reduce energy consumption and greenhouse gas emissions. Sometimes, we tend to lose sight of this goal while dealing with the OPERAT platform and data-related matters. However, the primary aim of complying with the tertiary decree is environmental. Energy isn't the only focus; at Société de la Tour Eiffel, we also emphasize biodiversity and building adaptation.
Benjamin Mercuriali:
I believe that we're witnessing the emergence of new roles. Asset management is evolving, and real estate management is changing. Honestly, I find this shift very positive. We need to take care of buildings, optimize them, and not forget about the people within them. After two years of the pandemic, we'll need to bring everyone back to the office.