Sustainability: valuation

A new route to CSR?

8 February 2013

Nick Orbell asks whether we have reached the peak in car ownership in the UK and looks at the possible implications of changes in car use on real estate.

The corporate social responsibility (CSR) agenda normally considers whether commercial activities are being undertaken in an acceptable manner. It is an area of significant business focus and can deliver tangible benefits if a company responds well, relative to its marketplace and brand. Equally, it can improve public perception and brand recognition for organisations that embrace and evolve good CSR practices. Tesco’s Less CO2 Rail supply chain model is one example: it is public reinforcement of the company’s commitment to reduce carbon.

By definition, CSR focuses on the strategic planning and behaviour, but few businesses consider how this may be extended to embrace employee behaviour. In the UK, the growing trend in car ownership and use is starting to challenge convention and offers a new angle on the CSR sustainability agenda.

Car dependency

Evidence is starting to emerge of a fundamental change in car dependency. A UK online insurance supermarket recently stated that 1 in 30 car drivers had given up their vehicle in the past 12 months – an astonishing 3%. Analysis of the manner in which people access vehicles, and increasingly regard other forms of transport as suitable alternatives, indicates strongly that a behavioural change is underway. This goes beyond the recognised ongoing change in the profile of car ownership, with a reduction in company-provided cars and greater consumer interest in smaller fuel-efficient vehicles.

The first effect is the fall in the number of new vehicle registrations in the UK, which were down 1.5% in 2011 compared to the previous year. Longer term growth in private car ownership currently shows an annual 0.4% increase, compared to an annual average of 2.4% between 1996 and 2007. According to Department for Transport (DfT) travel statistics, trips by private modes of transport fell by 14% between 1995 and 2010, while use of public transport overall increased by 8% and surface rail by a significant 58%.

Travel to work

Car sharing schemes operating through online platforms have emerged. These can form a key component of any comprehensive corporate travel plan scheme for the employer willing to encourage alternative arrangements as part of its suite of CSR policies. Since many employees have traditionally relied on the private car as the principal means of transport to work, a well-organised scheme offers a valuable tool to make car sharing easy and accessible.

It also provides a benefit to the employer in terms of data on use. One service platform, the Liftshare network, readily provides statistics. A wide range of organisations have adopted this service and it has more than 1,200 schemes currently registered. These will provide an estimated 500 million miles of lift shares in the UK over the next 12 months, which represents a carbon saving of 162,000 tonnes.

One user, Peterborough and Stamford Hospitals NHS Foundation Trust provides an example to demonstrate the value in capturing detailed employee take-up and use information. The trust’s car share scheme presents relevant data online and currently projects savings of 406,176 employee miles travelled and 133 tonnes of CO2 in estimated emissions. This form of statement says much about the organisation’s attitude towards sustainability.

Intelligent data

For any organisation engaging with customers, contractors and suppliers, detailed questions around corporate sustainable behaviour are becoming more common. When selecting suppliers and partners, businesses want evidence to support CSR statements, often to ensure engagement with like-minded cultures and objectives. The information captured by the Peterborough and Stamford Hospital Trust, for instance, would be appropriate and useful if used in procurement selection process criteria.

At present, however, how many organisations hold intelligent data that map and record their employees’ travel to work patterns or, equally relevantly, the business mileage travelled? Even without car sharing schemes, online survey tools make it quick and easy to capture and display some basic information about a workforce group.

Financial savings are often quoted as the primary benefit gained through car sharing or similar schemes such as local carpool hire. According to multinational car share provider Zipcar, among the 18-34 year old age group there is a particular issue around paying a significant cost for a car that they may use so little: “They want the freedom to drive, but reject the financial burden of car ownership”. Even learning to drive is an expensive outlay, estimated at over £1,300.

car graph

Why drive at all?

There are other more obvious pressures to consider such as car zoning and limited workplace parking provision in certain cities and congestion, each of which has a negative impact on individual driving and car ownership.

Significantly, there is emerging evidence that younger adults are not even learning to drive. DfT statistics demonstrate that in the under-30 age group in particular, the number of licence holders is falling (see Figure 1). The National Travel Survey 2010, undertaken by the DfT notes that, while the proportion of the 35 million licence holders in the UK remains broadly constant, the median age is increasing noticeably, reflecting the reduction in the number of younger people licensed to drive.

Social media

Social media is a key factor in reducing the need for driving skills. A study for Zipcar in the USA in 2010 established that 54% of the 18-34 age group preferred to spend time online in social networks with friends instead of physically visiting, compared to only 18% for 55-year-olds and older. We can expect this pattern to continue as today’s ‘noughty’ generation enters the workplace and older generations embrace technology. Social media in the workplace is also gaining acceptance; if this results in reducing business travel, it removes another traditional reason for owning a car.

Real estate implications

This trend raises fundamental questions for the real estate sector and challenges thinking around location, building specification and accessibility. It impacts primarily on the occupier, and is significant to strategic business planning with implications for personnel strategy, recruitment and retention, as well as for the CSR strategy and brand appeal highlighted earlier.

From the strategic real estate perspective, companies may need to reassess their location more carefully against the age profile and catchment area of their workforce both current and future. Not having access to a car or, indeed, the skill to drive, severely limits employment options. The younger high-tech company, with a relatively young workforce, may not regard the out-of-town technology cluster as the preferred option; the growth of media and technology hubs around the City of London is a current example of this in practice.

For the real estate market, this raises potential longer term issues for properties in those locations that depend entirely on car use, for instance out-of-town business parks and sites outside the central business district. Unless an integrated transport plan is in operation for staff travel to work, will occupiers show a marked preference for locations with good public transport connections, ultimately to the detriment of those car-dependent properties? If so, and this results in values being higher in these preferred areas, it will, in effect, reflect sustainability in a more financially tangible way.

Similarly, the trend adds further pressure to the retail sector: do younger consumers increasingly order online for home delivery because they have no personal transport available to allow easy access to in- or out-of-town retail parks? The roll-out by Amazon of local drop lockers for the convenient collection of goods makes ‘e-tailing’ easier for the consumer, adds another reason not to visit a store, and removes the need to own a car.

Even for businesses remaining in car-dependent locations, trends in car sharing raise questions about the amount of parking required. Since provision of a corporate travel plan is a cost, will this be reflected in rental bids, and could a building have too many spaces, adding unnecessary cost to the occupier? The assumption that significant parking provision improves asset value may simply become far less relevant.

One positive idea may be ‘agile parking arrangements’: permitting shared use of car parks for workers alongside a fleet of small delivery vehicles fulfilling the local online retail distribution networks to nearby communities. Compatible sharing arrangements providing 24-hour use are possible if building managers and owners are agreeable and can resolve the difficulties around joint occupation, planning use and lease alienation provisions. For the smart investor, this flexibility offers additional revenues opportunities.

Peak ownership?

In the UK, have we reached a point of peak car ownership? Patterns of change that contradict normal assumptions are not easy to recognise at an early stage. The reality is that social media in the workplace is here to stay and businesses are starting to recognise its value and positively adopt it. For example, it can act as an extension to conventional public relations through ‘good’ corporate gossip and as a means of issuing communications to a wide audience using a commonly accessible tool. In similar vein, fewer drivers and falling car accessibility are contemporary examples of behavioural economics in practice. The trend has interesting consequences for the property sector while benefiting the corporate sustainability and environmental agendas.

Nicholas Orbell MRICS has been practising in corporate real estate at senior level for the past 13 years. This article expands on a theme he first presented at an RICS/CoreNet event ‘Property in the Economy’ in October 2012.

Related competencies include: M009, T019