A PLAN FOR GROWTH IN A RESOURCE-CONSTRAINEDWORLD

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May 2012

A report from the UK-GBC’s ‘Industry Business Plan’ project

We have called this report ‘A Plan for Growth’, for what would seem fairly obvious reasons, with the industry still suffering from the deepest recession in living memory. But this piece of work goes beyond the current economic climate and indeed beyond the built environment sector as it currently exists.

This report is the result of a process which we called the ‘Industry Business Plan’ project. It was in part inspired by the words of Paul Morrell, the Chief Construction Advisor, who said in the Low Carbon Construction report “Over the next 40 years, the transition to low carbon can almost be read as a business plan for construction, bringing opportunities for growth”.

We are not suggesting that this report represents a comprehensive business plan for the whole industry – far from it – but we think it does begin to highlight opportunities for growth and commercial exploitation in that future resource constrained world. Of course it follows that it could also highlight risks for companies that fail to recognise and respond to changing customer attitudes and expectations.

This approach has seen a shift in tactics for UK-GBC. In the past, we have tended to ask “Where do we need to get to and how are we going to get there?” For example, back in 2009 we began asking what it would take to put the sector on a course to halve carbon emissions from the built environment in a decade. It seemed rather provocative at the time, but not long afterwards Government accepted the Committee on Climate Change’s recommendations and put in place a target to cut carbon emissions by 50% across the economy by 2025. The challenge of how we are going to meet our legally binding carbon reduction targets is now something that the Green Construction Board is working on, through the production of a Routemap for the sector, in which UK-GBC is actively involved.

In order to complement that work, we decided to take a different approach through this project, by asking “In a future in which energy and other resources are increasingly constrained and therefore more costly, there must also be significant commercial opportunities to be explored and exploited. What might some of them be?”

BACKGROUND

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AN ANALOGY: UK BUILT ENVIRONMENT PLC

To begin to grapple with this question, we created an analogy. If ‘UK Built Environment Plc’ was a mega conglomerate operating in the property, construction and infrastructure sector, which had just acquired all companies in the UK built environment industry, what would its plan look like for the next 10 or 20 years?

We imagined there would certainly be opportunities for vertical and horizontal integration across the supply chain. It would probably involve some divisions, or operating companies, being expanded, and others being wound up. It would also determine which new ideas need to be incubated or accelerated, based on the pursuit of high value, resource-efficient products and services.

Nobody is seriously suggesting this mega conglomerate is going to materialise, but by viewing the challenge through this lens, we think it offers an opportunity to look afresh at the way we currently do business, the assumptions that underpin that business, and the long-term viability of some of our current business models, products and services. What might some of the new and innovative commercial ideas be, that will revolutionise the way “UK Built Environment Plc” does business?

LEARNING FROM OTHER SECTORS

The End of the Kodak Moment

In 1976 Kodak sold 90% of the film and 85% of the cameras in the USA and in 1981 the company had sales of $10bn. This year it filed for bankruptcy. What went wrong?

Kodak’s business model was predicated on the sale of low cost cameras and profitable film, and the idea of the ‘Kodak moment’ – that people wanted to capture special moments on camera, which they would then place in a photo album. Now of course, the way we take and use photos has completely changed – people barely ever print out photos, and they take 10 where they previously would have taken one – and share them in new ways.

Although the first signs of the digital revolution were in place as early as 1981, Kodak failed to adapt its business model. Although it was one of the first companies to manufacture a prototype digital camera in the 1970s, it chose not to invest in the new technology. Kodak is an example of repeat strategic failure – it was unable to grasp the future of digital quickly enough, and even when it did so, its new approach was implemented too slowly. Although recognising the rise of digital film and cameras in the 1980s and 90s, Kodak’s business model remained highly profitable and so it avoided risky decisions, and instead developed procedures and policies to maintain the status quo. As a consequence the company was completely over-taken by its rivals.

www.martinfrost.ws/htmlfiles/oct2011/What-Went-Wrong-At-Eastman-Kodak.pdf

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As any organisation would when embarking on a process of strategic planning, we scanned the horizon and assessed the likely future operating environment. This included a PEST analysis – a review of the likely political, economic, social and technological trends and drivers going forwards – and future scenarios modelling, in which we built on the extensive work previously carried out by the Foresight Programme1.

The following represents a brief snapshot of that work, which can be accessed in full here: www.ukgbc.org/planforgrowth

THE FUTURE OPERATING ENVIRONMENT

UNDERSTANDING THE PRESENT

Assessing the impact of the future operating environment requires an understanding of the present. Workshop participants identified several ‘assumptions’ about how we currently do business, which included the following examples: Business decisions are made on the basis of

short/medium term profit, not the long term: capital costs are king

The industry makes money on variations, which creates legalistic and sometimes conflicting working relationships, and impedes partnership working

The industry believes that it knows what sorts of buildings consumers want to live/work in, and these tend to be traditional in style and production methods

There is stigma around renting in the housing sector, and buying is the ultimate goal

Energy consumers blame suppliers for high utility bills, not the building, or their usage.

LOOKING FORWARD 10-20 YEARS

The Foresight Programme developed 4 separate scenarios. We identified common themes running through those:

Energy prices are likely to rise because of increasing pressure on supply of fossil fuel, particularly oil, and also increased demand from emerging economies

There may be stronger regional or local identities – communities may be more tightly connected either locally, or virtually

UK population is likely to continue to grow

Consumers are likely to have a more personal or direct relationship with their energy and resource consumption

Policy drivers and high energy costs will lead to an increase in retrofitting of buildings, while new builds will need to cope with more extreme weather events

ICT technologies will develop rapidly and have an impact on working patterns

New energy technologies will come on-stream, and better use of existing technologies will help to manage energy more effectively

The built environment itself may look remarkably similar, but the underpinning services, partnerships/business relationships and delivery will be fundamentally different.

1 www.bis.gov.uk/foresight/our-work/projects/published-projects/sustainable-energy-management-and-the-built-environmentoperatives

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THE PROCESS OF INNOVATION

We worked closely with 100%Open, a leading open innovation agency, on the next phase of the project. The challenge was to use the scenarios we had outlined to inform the development of future commercial opportunities. We did that through a structured three stage process, using collaborative workshops with our members and partners.

1 Explore – We could see that in the future scenarios we had outlined, some of the assumptions – the current way of working – would be challenged. Therefore we examined these underlying assumptions and looked for ‘insights’ which would lead to commercial opportunities. We drew inspiration from examples of breakthrough innovation from other sectors2.

2 Extract – Armed with a series of insights on a whole range of issues, we worked together in small teams to develop at least 10 new high-level propositions. Over the course of a few weeks, and seeking wider input, the number of propositions grew to around 16. At an intensive business model workshop we critiqued and validated these, ending up short-listing 5 for further development.

3 Exploit – In this final phase, we created a template to reflect the commercial opportunities and environmental benefits underlying each proposition. A number of UK-GBC members worked together to develop the 5 concepts further, which are presented in outline summary on the following pages, with further detail available in the online appendices: www.ukgbc.org/planforgrowth

2 For example see www.w2lessons.com/2010/09/business-lessons-from-blockbusters.html

Assumption: The industry believes that it knows what sorts of buildings consumers want to live/work in, and these tend to be traditional in style and production methods.

Insight: “There is an opportunity in providing customers with a more bespoke home or building design service that better meets their needs”.

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BACKGROUND

Currently, take-up of small-scale low carbon energy projects is relatively low in the UK, compared to countries like Germany. There are a number of barriers: Lack of economies of scale

Lack of standardisation, which increases costs

Tension between commercial direction and the collaborative nature of the project

Difficulty in attracting third party finance

Accessing expertise and the costs associated.

Community Collaborators would contribute between 50-100% of capital to project development costs (depending on the community’s equity stake) and thereafter either retain their stake or aggregate a number of operational projects into a portfolio to sell on to institutional investors. The vision is that revenue will be recycled to support the delivery of other new community owned schemes. Community Collaborators would facilitate the process and bring together:

Communities who wish to get involved with and invest in energy provision, and are seeking mezzanine finance4 as risk capital. This could include individuals, local businesses, landowners, local authorities, housing associations and more

Institutional investors (such as pension funds) who are seeking long term stable returns

Private sector experts/infrastructure suppliers who see value in a long-term partnership with communities.

3 Community Energy Projects refers to low carbon or renewable energy schemes which are owned by the local community through established legal structures (such as Co-operatives, Community Investment Companies or Social Enterprises) and/or generate tangible local benefits.

4 Junior debt with an intermediate risk profile between senior debt and equity from the local community

THE PROPOSITION

Community Collaborators would provide a ‘one stop shop’ thereby enabling communities to inform the design of, invest in and acquire funding for low or zero carbon community energy solutions. The goal is to facilitate the delivery of community owned energy projects3, reducing both complexity and cost by combining private sector expertise, community involvement and third party low cost finance. This is achieved by setting up key principles and standardised offers that can be replicated, possibly across a region.

Projects could include:

Single megawatt-scale wind turbines or small wind farms

Community hydropower schemes

Anaerobic digestion schemes for individual farms (< 5MW)

Gas combined heat and power and district heating (< 5MW)

Portfolios of smaller installations such as solar PV on homes and community buildings.

COMMUNITY COLLABORATORS

CUSTOMER JOURNEY

Watch a short animation of the customer journey at

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Taking the idea further?It is possible that with the Green Deal, Community Collaborators could provide support for communities to come together and procure retrofit (which has a number of funding streams) much more cheaply and, in time, potentially other forms of infrastructure using a similar business model?

Key Challenges, Potential Risks and AssumptionsPre-development costs are disproportionately high for community renewables projects when compared with larger commercial projects since there are many relatively fixed costs (site selection, planning, etc) to weigh against small installed capacities. Also community renewable projects are developed as one-off schemes without access to extensive professional expertise.

There is an assumption that an entity such as GIB would be willing to consider using its position in the market to invest in Community Collaborators, providing both early stage development funding and capital funding in the form of mezzanine debt and/or through creation of an arms’ length fund to be managed and invested by Community Collaborators. Approaches are being made to the GIB.

interest rate charged on mezzanine debt secured and on-lent to the project by Community Collaborators.

The main revenue streams are from projects where Community Collaborators retains its stake and from revenue earned from the sale of aggregated portfolio of projects to institutional investors.

There would be a cost associated with developing an online portal to interface with partners, but this could also be a source of revenue from advertising. There would also be costs associated with developing a network of expert partners (technical, legal, planning, financial, project management etc).

5 www.ukgbc.org/document/community-collaborators-worked-example

6 We are grateful to Verco and the Co-op for providing this worked example, full references available through the link

Costs and RevenueA worked example5 illustrates how a £391,000 capital investment into a community wind turbine could yield annual revenues of £52,000, equivalent to a 7% internal rate of return6. The difference between this and the commercial bank lending rate of 5.55% would fund development work in subsequent projects.

It has been estimated that if Community Collaborators were to underwrite 50% of pre-development costs (with match funding from other sources such as the European Rural Development Fund or the local community) then a fund would need to be established of approximately £27m over 10 years, to deliver 1GW of new generating capacity. This could be funded through a small premium on the

Environmental and social benefitsProjects under some form of community ownership and control can:

Generate higher levels of local acceptance, trust, knowledge and support of energy provision

Address fuel poverty (e.g. Aberdeen Heat and Power shows how district heating can help provide affordable warmth)

Mobilise investment from the community

Diversify local economies, especially rural areas

Build knowledge and confidence which translates into behavioural change at an individual household level.

Precedents and Related Links Abundance Generation – company that enables people to

invest in green energy: www.abundancegeneration.com

Aberdeen Heat & Power Ltd: a not-for-profit company that was set up by Aberdeen City Council in 2002 to develop and operate district heating and CHP schemes: www.aberdeenheatandpower.co.uk

Energy4All: experts in community-owned renewable energy schemes, have developed 7 renewable energy co-operatives since 2002: www.energy4all.co.uk

Carbon Leapfrog: a charity that channels professional advice across a range of disciplines into carbon reduction projects: www.carbonleapfrog.org

The Co-operative Enterprise Hub: a one-stop shop for free advice, training and access to finance for new and existing co-operatives: www.co-operative.coop/enterprisehub

Big Society Capital: an independent financial institution established to give organisations tackling major social issues access to new sources of finance: www.bigsocietycapital.com

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BACKGROUND

Inspired perhaps by popular TV programmes, for many people designing their own home is an attractive but unaffordable dream. Even those that have the financial means often struggle to access the land they need and don’t have the necessary knowledge to navigate the planning and construction process. Those wanting a newly built home are therefore often reliant on incumbent house-builders and standard design templates.

Elsewhere in Europe, rates of self build are often considerably higher – something which Government is keen to address, with the recent launch of a self build strategy and portal7. The challenge therefore, is to find a way to meet this unfulfilled demand, bringing self build or design to a wider market. At the same time, there is a need to ensure that those choosing this new service would, as a standard, be provided with homes that offer a high level of sustainability and a real sense of community.

THE PROPOSITION

You Design & Build would provide customers with an end-to-end home design and development service. This includes offering them access to a plot of land, and a high degree of choice over the design and build of the property to meet their aspirations. Each property, and the wider development within which they are built, will deliver sustainability, quality of life and a place in which a community can thrive. Customers customise the design and flexibility

of their home to meet their current and future needs, and get a fixed price to build it. This includes the opportunity to specify both external and internal appearance, technology and layouts, and influence the shared amenities of the development

Customers will know that the property will be warm, comfortable and sustainable, with low running costs – with a high standard of energy efficiency offered as standard. Key information in dashboard format will provide instant feedback as they design the home – e.g. on the likely energy requirements, based on the fabric and technological options chosen – encouraging them to go the extra mile with the sustainability of their design choices

The property is built to meet or exceed regulations, so will be suitable for standard mortgage and building insurance products etc.

7 www.buildstore.co.uk/ActionPlan/Govt-Action-Plan-July-2011.pdf www.selfbuildportal.org.uk

YOU DESIGN & BUILD

CUSTOMER JOURNEY

Watch a short animation of the customer journey at

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Taking the idea further? A greater degree of choice over design/

appearance as the regulatory framework allows

You Design & Build could provide a service for existing house-builders looking to exploit this market through a form of ‘mass customisation’ – or in the future, fulfil self build requirements imposed on them, e.g. by local authorities

Service to reconfigure homes as needs change, e.g. movable internal walls

Mutual company structure that allows buyers to become shareholders in the company

Finance and energy service provision.

Costs and Revenue Currently self build represents 10% of the UK

new-build market and the Government aim to double this. You Design & Build would target up to 50% of this new self build market – in excess of 10,000 homes per year

Pricing would be a margin above standard new-build homes – accepting that there would be a premium required to build to a high standard of sustainability, but sold on the basis of their high design value, personalisation and low running costs

There are up-front costs, particularly web tool development (a form of self build Building Information Modelling) and potentially land acquisition. External investors would be required.

Environmental and social benefits Raises the bar of sustainability

in new build

Increases rate of new-build to meet demand

Encourages shared value communities where shared activities are built-in

Greater opportunities for community energy infrastructure

Avoid wastage in the housing stock from unsuitable or unwanted properties.

Precedents and Related Links Self build rates in other EU countries are as high as 80%

of new-build, with an average of around 50%: www.nasba.org.uk

53% of people are interested in building their own home: www.bsa.org.uk/mediacentre/press/self_build_tool kit.htm

Current developers already offer some choice, particularly on interior features

Plot: a recent start-up offering plots of land and guidance through the self build process: www.dreamplot.net

The National Self Build Association predicts a 141% rise in the mortgages available for those building their own homes over the next three years 100,000 people subscribe to one of the main plot-finding websites.

Architect Your Home: an agency which offers you access to local architects who know the planners in your area, and who give you a bespoke service – as much or as little help as you want to pay for: http://architect-yourhome.com

Key Challenges, Potential Risks and Assumptions A key task is to develop a land acquisition or

identification strategy. This will include working in partnership with local authorities, and potentially focusing on sites that are currently considered to be ‘low value’

Ideally this requires a new approach to planning that allows for greater flexibility in design

Risks include difficulties in finding suitable and affordable land

There may be a large up front capital requirement

There may be a trade-off between level of design choice and planning permission and other issues around gaining planning approval

There is a current bias of finance provision against self build.

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BACKGROUND

There is currently no easy way of searching for ‘green’ homes or communities via existing market leading property search websites. But as energy prices rise and EPCs become more widely recognised, home buyers and renters will increasingly want to know how energy efficient their property is.

Beyond just the fabric of the home, there is also an unmet need for better information for both new and existing residents about local community amenities and services – features that make a community sustainable in the widest sense of the term, economically, environmentally and socially. There are existing websites that do some, but not all of this, and not in a way that connects home buying or renting (and therefore value) with sustainability at a community scale. In the initial stages, the volume of users would

be built up by rolling out the website on a community-by-community basis, in partnership with a small number of local community groups or organisers (such as Transition Towns) who take responsibility for moderation.

Housebuilders marketing new build homes could find the site attractive to use, particularly given new build homes should have a good EPC and/or Code for Sustainable Homes ratings.

A key feature is the user-generated nature of content, albeit under moderation of local web managers. Most property search websites either charge estate agents, or are designed for those selling homes without estate agents. This would suit either. The seller markets their own property – with prominence given to green criteria – but the seller will probably remain the estate agent in the majority of cases.

THE PROPOSITION

If you want to buy, sell or rent a home and think its green features and the sustainability of the local community are important, this is the website for you.

Liveable Places would be an online portal that enables: People searching for a home to buy or rent

to find out more about its green features (e.g. EPC rating or water saving solutions)

People selling a home, or renting out a home, to promote its green features and associated financial benefits

People moving to or already living in an area to find information about local activities, amenities and services that together make the community more sustainable, and more ‘liveable’ (transport links, green space, car clubs, community groups and activities) – a resource for the local community, bringing like-minded people together

Providers of those services to promote their activities and for local businesses to advertise.

LIVEABLE PLACES

CUSTOMER JOURNEY

Watch a short animation of the customer journey at

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Taking the idea further? The site could carry green

job advertisements and/or green events or educational opportunities

Could Liveable Places branch into the commercial market?

Key Challenges, Potential Risks and Assumptions There is an assumption that there is a sufficient

volume of people involved in Transition Towns and other community groups who would find this of interest

The web build is a technical challenge and could be costly

Data issues could prove a barrier – collecting/storing EPC data

Marketing is key – particularly to make a success of the initial pilot/demo phase. If those fail, the whole project will struggle

Lack of information/poor quality of information would be a significant barrier – much of which is down to user engagement

An inability to properly integrate with other sites is a risk and another technical challenge

There is low protectability of this business model.

Costs and RevenueA key attraction is that costs would be relatively low, being mainly web development and marketing. Potential exists for commercial growth when a user base has been built up. The website or app would be free to use at first; but once established, there is the potential to charge for an app and/or for a charge to be levied on existing property search websites for access to a ‘plug in’, as well as revenues from advertising.

Environmental and social benefitsThe site would provide a user-friendly guide to the EPC, helping to translate the A-G rating into something that makes greater financial sense, therefore encouraging the pricing in of energy efficiency into property value and encouraging retrofitting.

It would also aim to promote green as a key feature of ‘liveability’ – i.e. the greener a property and the greater the community activities, the more sustainable and the more liveable a property and community. Areas previously thought of as undesirable could score quite highly based on strong sense of community and thriving activities. The Big Society in action!

Precedents and Related Links www.greenmoves.co.uk, www.

freehouseagent.com etc – potentially meets elements of the need, but no community angle, limited search functions and under-utilised

www.tepilo.com – typical of a new breed of property website, but doesn’t have a ‘green’ USP and doesn’t have a strong community angle

Transition Towns – a network of highly engaged communities, with active web presence: www.transitionnetwork.org

Neighbourhood forums – could play a role?

Local Facebook community groups – could Liveable Places signpost to them?

Over time, Liveable Places could continue to complement existing market leading property search websites; or it could compete directly by offering an alternative to those sites; or it could be sold to one of those sites in its entirety.

Although profitability is modest, long-term there is an indirect benefit for the UK construction sector through the increased association between sustainability and value, a boost to the Green Deal and – in time – the mainstreaming of green homes.

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BACKGROUND

Traditional home ownership is now out of the reach of many people in the UK. The average first time buyer is now 37 years old, and needs a deposit of £66,0008. 25 year mortgages are the norm, even though we move home on average every 7 years. Transaction costs for buying a home and moving are high. Once we ‘own our own home’, we typically underestimate the on-going cost and hassle of routine maintenance and occasional major refurbishment.

Renting a home is more flexible but feels like throwing money away, and it cannot provide security over the long-term. The private rented sector is largely unregulated; rents may be high and property poorly maintained and expensive to run – with little incentive for landlords to reduce running costs for tenants.

In both the rented and owner-occupied markets, owing to the poor energy efficiency of most UK homes, energy bills are high and rising fast. While it is increasingly easy to change provider, acting alone the individual home occupier lacks bargaining power that larger energy customers can command.

Regular payments enable you to build your equity stake (equivalent to a traditional capital repayment, plus interest), include a service charge (to pay for maintenance and major refurbishment projects managed by experts in a cost-effective way), and utility bills.

All property in the scheme is brought up to high levels of energy and water efficiency, so as your running costs go down you can choose whether your payments go down or you increase your savings/equity more quickly. When you move home, you gain from any uplift in value, and that goes into your personal savings pot that can be redeemed at any time, (or kept for life and passed on to your dependants). In the worst case of negative equity, as long as you remain in the scheme, your debt is not crystallized and you can continue to pay an affordably monthly payment – in the same or a different property – until your equity recovers.

8 (First Direct study Sept 2011)

THE PROPOSITION

Great Home, No Hassle is a new way of getting the home you need, without a large deposit, a 25 year mortgage, or the hassle and expense of on-going maintenance and refurbishment. The scheme could be underpinned by a new kind of ‘Green Building Society’, a member-led mutual that would provide this innovative new home financing facility.

The scheme provider would purchase and own the property – it could be an existing home, a new build home, or the home you already occupy. A flexible monthly payment plan, aligned to what you can afford to pay and the kind of home you need at any given time, can stay with you for life (like a pension scheme), regardless of how often you move home.

GREAT HOME, NO HASSLE

CUSTOMER JOURNEY

Watch a short animation of the customer journey at

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Taking the idea further? Monthly payments under Great

Home, No Hassle could be extended to replace traditional pension plans

Ultimately all home service needs could be met through an integrated package, aligning home finance with leasehold cars, home entertainment services, phone packages etc.

Key Challenges, Potential Risks and Assumptions Requires large institutional investors with

a long-term view

Needs a management company to oversee maintenance, refurbishment, negotiate utility provision etc

Would benefit from a mutual/Green Building Society whose members are beneficiaries of the scheme

Assumes people are prepared to forego conventional home ownership

Assumes it is possible to aggregate sufficient capital to provide equity security

Requires regulatory approval – including avoidance of Stamp Duty.

Costs and RevenueThe Great Home, No Hassle provider would need to amass sufficient capital to purchase the property occupied by its customers. Obviously, subject to the size and success of the scheme, this could require a very large fund of potentially billions of pounds. The fund would require all the relevant expertise associated with FSA and wider regulatory/legal compliance and fund management. The scheme would also require a significant investment in marketing to raise awareness and demand for a radically new approach to home finance.

Environmental and social benefits Drives energy and resource-efficient

refurbishment by providing economies of scale

Incentivises efficient behaviour to reduce running costs

Mutuality creates long-term social and community benefits of cohesion and common purpose

Bring empty homes back into good use.

Precedents and Related Links Social housing shared equity schemes

New offering from Gentoo: www.justaskgenie.co.uk

www.pocketliving.com

Ethically-driven banks and building societies – could be key partners?

Timeshare – could learn lessons

Offset mortgages – some parallels: money you have in your savings account can be counted as a temporary overpayment towards your mortgage.

In return, revenues would be generated from interest on finance, investment returns and equity growth in the property portfolio over time. The scheme should also generate a margin on maintenance and refurbishment services, and from provision of utilities, potentially via an energy service company (ESCO) or multi-utility service company MUSCO.

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BACKGROUND

The traditional way that businesses use space – leasing fixed amounts of space through long term contracts – is inefficient as it fails to adapt to the changing needs of an organisation. There are 10 million office workers in the UK and average office costs per head are around £6,000. Meanwhile, a traditional office is used for only 30% of the year.

Furthermore, living outside of major cities and commuting to work has negative impacts on both the quality of life of workers, and the environment – the average UK worker commutes for just under an hour a day, equivalent to 4 years over a working life.

Yet the way we work is beginning to change significantly. 12.8% of the workforce now works mainly from home and 27% of people work part time. The right to ask for flexible working is also now enshrined in law for parents and carers, and staff surveys consistently show that employees want more choice about where and how they work9.

Use Space Well would provide a tailored service to businesses advising them how they can make better use of space, and cut costs, depending on their needs, location, employee numbers and functions. The advice might include, for example:

Reducing numbers of desks in expensive prime city centre locations

Offering employees the opportunity to work at home regularly where appropriate

Providing employees with access to ‘usespacewell.com’ and a swipe card/phone app to enable them to book flexible space wherever they need to work, for however long they need it, to be charged back to the employer

Advising the business how they can securely sub-let spare desk space in their own offices, with the agreement of the landlord who will benefit from a share of any income generated

Information on money and carbon savings from more flexible working.

9 All statistics quoted above are from The Smart Working Handbook by flexibility.co.uk

THE PROPOSITION

Use Space Well could transform how companies lease and rent space, allowing much greater flexibility and offering benefits through vastly reduced fixed costs. A website would offer access to hundreds of different desks, meeting spaces, retail areas and ‘pop up’ spaces available all over the country for employees to use, on an hourly/daily/weekly basis, meaning that less desks in urban centres are needed, cutting overheads and reducing transport costs.

USE SPACE WELL

CUSTOMER JOURNEY

Watch a short animation of the customer journey at

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Key Challenges, Potential Risks and Assumptions Security concerns about third parties

using rented desks

How to create critical mass to have enough different spaces to offer businesses

Costs of marketing?

Costs and RevenueInitial investment would be needed in the technology and software including the website. Software needed may include: booking system, rating system and club card; use of GPS system; scanners and charging system etc. Estimated cost is £100k if adapting an existing system.

Additional costs would include ongoing maintenance and quality assurance, legal monitoring and assurance (see www.ukgbc.org/document/use-space-well-example-costs for more details), supply-side sales and major marketing campaigns to attract customers. Revenues would be generated from membership fees (set according to size of company), advertising on the website and fees on all transactions (10%).

Environmental and social benefits Reduced carbon from transport

Less new buildings needed

Higher occupancy of buildings – more efficient use?

More free time – less time commuting

Supporting local services and regenerating high streets

Extending work opportunities to remote areas and disadvantaged groups.

Taking the idea further? Could customers book space

in different buildings for work, leisure and even sleep? All aspects of the buildings, including the interior design and furniture, would be designed to enable flexible use.

Whip Car – rent cars from people on your street: www.whipcar.com

The Hub – offering desks and workspaces on a flexible basis: www.the-hub.net

WorkSpace Group– offering drop in desks, virtual offices and meeting space: www.workspacegroup.co.uk

Loosecubes – US based company matches business owners who have extra space with members who need a place to work on a flexible basis: www.loosecubes.com

Precedents and Related Links Regus offers flexible office

spaces on a pay as you go basis: www.regus.co.uk

Zipcar – a car club offering local rental cars for flexible amounts of time: www.zipcar.co.uk

Home Exchange – international home swap website: www.homeexchange.com

Air B&B – rent room or a couch in someone’s home, and rate the facilities online when you leave – and landlords rate the guest: www.airbnb.co.uk

Roomorama – rent peoples’ homes while they’re away: www.roomorama.com

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The 5 ideas we have set out are just examples of the kinds of innovative products, services and business models that could emerge in the mainstream of the built environment industry in the years ahead. Most if not all of them have already been tried or tested on a small scale, in niche markets, as is often the case before large scale change takes hold. Some may succeed, some or all may fail – but that’s not really the point. The fact that these ideas have arisen from this process at all, and been fuelled by the energy of a wide range of stakeholders from UK-GBC member organisations right across the industry, tells us something important. There is clearly a latent desire to do things differently, to better meet the needs and aspirations of people living and working in 21st Century Britain. For that reason, we dismiss their significance at our peril.

Approximately 50 people took part in the workshops and meetings that made up this project over the course of 6 months. That is a reasonable sized project for UK-GBC, but a tiny number of people and days spent together relative to the scale of the UK’s built environment industry. It was remarkable how easily these people left their respective ‘hats’ at the door, set aside the traditional prejudices of their particular profession or discipline, worked openly together and responded to the process simply as individuals who felt the need to do things differently from business as usual. A number of key insights and clear themes emerged from the process, which appear to correlate to trends being identified in other sectors of the economy, and the needs of a more sustainable built environment industry. These are framed below as strategic insights. We put these forward not as the final word, nor as some sort of incontrovertible truth, but as a summary of what we believe represents a summary of the shared learning from this process, and as challenges that industry needs to grapple with in the very near future.

KEY INSIGHTS

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1 COLLABORATION IS KEY

The need for greater collaboration is something that has been talked about for a long time in the construction and property industry, and has featured prominently in several notable reviews such as Egan’s Rethinking Construction. But there appears to be a renewed appetite for pan-industry collaboration – working together across the supply chain and building lifecycle to better meet customers’ needs and to drive cost-effectiveness, and this fits well with the principles of whole-life cost and whole-life value.

2 COMMUNITIES ARE MOBILISING

Community emerges as another powerful theme. Whether it is communities of people living or working in particular locations, or communities of shared interest, or both, there seems to be a real resurgence of interest in how we can work with others with similar wants and concerns to ourselves. We might increasingly be prepared to negotiate and purchase services as part of a wider community of customers, to exercise our collective bargaining power. We might prefer to own a stake in something over which we feel collective ownership, confident that the enterprise has our interests at heart, not just the nameless, faceless interests of shareholders far away.

3 CUSTOMERS AT THE CENTRE

As customers, we increasingly want to be involved, empowered and at the centre of things. One of the most powerful elements of the social media revolution is that people are no longer passive recipients of information, they want to create and share it too. People want the economies of mass production, but the personalisation of individual choice and design. How can we create products and services that meet these twin needs? What is the potential for mass customisation in the built environment industry, as well as the car or sports shoes industries?

4 SPACE IS FLEXIBLE

People are beginning to challenge the constraints of an inflexible built environment. And just as they are preferring the flexibility of services over fixed assets elsewhere in their lives, they are beginning to ask why don’t we think more about the space we need and the time we need it for, rather than the rigid four walls of buildings? Why do we need to be preoccupied with owning or even renting homes and offices outright, if we can get all the benefits and less of the downsides from leasing them as a service – as many of us do with our cars or mobile phones?

5 FINANCE IS CHANGING

And in the depths of the worst recession in living memory, arising out of an unprecedented global banking crisis, what is the role of innovative finance? The housing boom of the 1930s resulted from a loss of confidence in the banks in the 1920s and people moving their money into the more trustworthy, accountable building societies. More than ever people have become mistrustful of big banks, and the motives of the bankers with their big bonuses. Who will people trust in the future – will we see a resurgence of mutuals, local and community-owned institutions and further increases in peer-to-peer lending?

© ALLFORD HALL MONAGHAN MORRIS/TIM SOAR

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Britain in 2030, or 2050 for that matter, may look disarmingly similar to Britain today. Over 80% of the homes, offices and buildings we will be living and working in in 2050 are ones we are occupying right now. If we meet the target set out in the Climate Change Act we will have reduced carbon emissions by over 80% across the economy, equivalent to levels of emissions 200 years earlier in 1850, but people will of course expect a mid 21st Century quality of life.

AFTERWORD AND NEXT STEPS: PAUL KING, CHIEF EXECUTIVE, UK-GBC

The low-carbon Routemap work being lead by the Green Construction Board is important for understanding the likely implications and effects of the many policies and planned interventions to decarbonise the built environment and how they will affect businesses right across the industry. But the key insight from this project is that simply doing business as usual, just a bit better, will not be enough. Even if we hit the carbon reduction targets and the wider resource efficiency goals needed to balance the environmental books, we will fail socially and economically if we do not meet our customers’ future needs and demands. There will be ‘for sale’ signs outside our zero carbon homes if they turn out to be in the wrong location, or don’t have sufficient aesthetic appeal.

Arguably, the built environment industry has been slow to embrace innovation compared to many other sectors. However, a future of constrained and therefore costly resources, with increasingly well-informed consumers, will require rapid innovation and responsiveness right across the supply chain. Otherwise, competitors from other sectors are likely to move into the market. For a truly sustainable built environment industry, we need to think beyond the construction and handover of buildings to embrace the consumer’s ongoing needs. We need to combine the concepts of product and service, customisation and scale, into a new whole-life way of looking at the value of built environment and its effects on the lives of people living and working there.

The purpose of scanning the horizon as a part of any strategic planning process is to gain insights from the possible future into how we should change what we do today. The fact that there are already many small examples of these bigger ideas under development suggests that change is already happening – albeit mainly unnoticed by current large incumbents. The question is whether bigger, more powerful players can recognise these trends and adapt their business models sufficiently to survive and thrive in the future.

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WHAT HAPPENS NEXT?

Business model innovation has been a new space for UK-GBC to get into, and we think it has been a very productive exercise. Throughout this process we have been asked what the next steps are.

It may be that you feel there is merit in some of the specific ideas put forward, and don’t want to see these simply shelved. If so, great. We are relaxed about how these ideas get taken forward and make no claims over ownership. We would love to see members competing, or (of course) collaborating, to develop them further. If there is a role for UK-GBC to continue to play to help facilitate this, then we can do that.

We sense that perhaps the most value has been gained by those who have taken part in the process, because arguably it is the collaboration and the insights gained from asking such tough questions, which matter more than the individual ideas that have come out of this. If so, we would like your views on how we build on this. We could carry out this type of exercise on a regular basis, or work in a more bespoke way with members to embed this type of thinking within your organisations and the wider industry.

So what happens next? The answer is, it’s up to you!

To give us feedback on the Plan for Growth, go to www.ukgbc.org/planforgrowth

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UK GREEN BUILDING COUNCIL

The UK Green Building Council exists to promote a radical transformation of the built environment – one that minimises negative environmental impacts and maximises benefits for people everywhere.

We believe there is another way for the construction and property sector to do business – creating green buildings that help provide a better quality of life and which offer better value for organisations. We believe that in the future, sustainability will be an essential precondition of profitability, and that a low carbon, sustainable built environment will play a crucial role in the UK’s transition to a green economy.

Supported by 400 member organisations we work with industry and policy-makers to help find innovative solutions to green building challenges. It is the diversity of our membership that is our great strength, enabling us to tackle problems collaboratively, outside the confines of one particular interest group.

Website: www.ukgbc.orgEmail: info@ukgbc.orgTwitter: @UKGBCPhone: 020 7580 0623

UK Green Building CouncilThe Building Centre 26 Store StreetLondonWC1E 7BT

ABOUT THIS PROJECT

This project has been generously sponsored by Aggregate Industries, Heathrow Airport Ltd, E.ON and Mitsubishi Electric and has also attracted funding from the Technology Strategy Board.

Drivers Jonas Deloitte has provided project management and research support.

UK-GBC would like to thank the following organisations for their involvement in the project. This does not imply endorsement of the concepts included in this report.

Aggregate IndustriesArupAtkinsBAM ConstructBarratt DevelopmentsBennetts AssociatesBLP LawBuro HappoldCarbon TrustColliers InternationalConstruction Industry CouncilConsumer FocusCundallDPP SustainabilityDrivers Jonas DeloitteEC HarrisE.ONEPR ArchitectsExploration ArchitectureThe Futures CompanyGentooGVAHammersonHeathrow Airport LtdHomes and Communities AgencyIgloo RegenerationIGT 2050 GroupImperial College, LondonInstitute for SustainabilityInterfaceFLORJones Lang LaSalleLegal & GeneralLend LeaseMarks & SpencerMitsubishi ElectricNew Economy Manchester100%OpenReynolds Porter ChamberlainSchrodersSkanskaSweett (UK)Technology Strategy Board Tishman SpeyerUCL - CLUES ProjectVercoWillmott Dixon