M&S Marble Arch and the future of UK green building policy
Making sense of the latest trends in property and economics from around the globe
4 minutes to read
Refurbish or rebuild?
M&S wants to demolish its 1930’s Marble Arch flagship store and replace it with a building that, from an environmental perspective, will perform in the top 10% of buildings in London. The company is seeking three green building accreditations for the project.
Yet environmental campaigners aren't happy. Michael Gove paused the project following a report from Simon Sturgis that indicated demolition and reconstruction would add 40,000 tonnes of extra CO2 into the atmosphere. In doing so, Gove propelled the project from a fairly localised spat to a lightning rod for an entire industry's disagreements over how to address the problem of embodied carbon. My colleague Emma Barnstable lays out the details, and weighs up the wider significance.
M&S, Emma writes, concluded that refurbishment would offer lower initial embodied impacts, though that would rise unacceptably over time due to poorer operational performance. The current store comprises three buildings which have proved difficult to modernise and the refurbished building would require maintenance every 5-10 years. Despite a higher upfront carbon impact, M&S opted for an operationally more efficient building.
Ultimately, we don't have an effective method for resolving the issue in our current system beyond a "call in" from the Secretary of State, which is a void that will need to be filled by the incoming administration. France and the Netherlands already have systems in place that weigh up emissions from construction, maintenance, demolition, plus the energy used in any building's daily operation. We are probably moving in that direction - an influential group of MPs argued back in May that a similar system should be mandatory in the UK. That would incorporate embodied carbon into both building regulations and planning policy.
Dollar euro parity
The euro is approaching parity with the dollar for the first time in two decades.
The Fed's particularly aggressive approach to tightening monetary policy relative to the Eurozone and Europe's vulnerability to rising energy costs puts the current rate at $1.05. Capital Economics forecasts the two will reach parity by the end of the year.
The movement is being felt in Europe's property markets. Analysis of Knight Frank’s website traffic shows property searches for French property by US-based buyers increased 37% in the first five months of 2022 compared to the same period a year earlier.
The currency play is only part of the story. Two years of closed borders during a period of rapid wealth accumulation have formed a large pool of pent-up demand.
US mortgage rates
There is little evidence emerging from the US that suggests the Fed will change tack any time soon. June's jobs data was more robust than analysts had anticipated - employment and pay continued to rise, with the pace moderating only slightly.
The longer this goes on, the more doubts will grow over the Fed's ability to cool inflation without tipping the economy into recession. We talked last week about investors pricing in rate cuts from next summer as the Fed tries to stimulate growth all over again.
The average fixed rate 30-year mortgage has dropped by more than half a percent in the last fortnight, which is indicative of how markets view the Fed's credibility, rather than a meaningful move in affordability.
Farmland
The average value of bare farmland in England and Wales increased by a further 4% to £8,190/acre in the second quarter of 2022, according to the Knight Frank Farmland Index. That puts land values close to the record highs last seen at the end of 2015.
Prices have risen by 8% so far this year and 16% over the past 12 months, driven by a significant supply/demand imbalance. Only 34,000 acres of land have been advertised so far this year in Farmers Weekly, according to the magazine’s Land Tracker – an 11% drop on the volumes seen in 2021, which was already a record low. Three small blocks of land that recently sold in the Cotswolds went for almost double their estimate, reports a colleague based in the region.
Tax-driven buyers looking to reinvest the proceeds from development or compulsory purchase sales remain significant players, but they are having to increasingly fight off interest from the growing number of environmentally motivated purchasers. Some of these are looking at farmland with an altruistic eye and hope to boost biodiversity and make more space for nature via rewilding or other wildlife-friendly land management practices. Others are focusing more on alternative revenue streams such as carbon payments derived from tree planting or soil management schemes.
In other news...
BoE under pressure as UK companies plan for extended period of inflation (FT).