Ann Gray FRICS, President of the Royal Institution of Chartered Surveyors (RICS) and President-Elect Tina Paillet FRICS spoke to Property Forum at MIPIM about the recent and upcoming changes in the organization, innovative carbon reduction standards and creating equal opportunities in the property industry.
First of all, congratulations to both of you on your election. Ann, what are your key goals and plans for your presidency?
Ann Gray: This presidency is a little bit unique. This is the year that the presidency became combined with the Chair of the Governing Council. It means that there's an administrative, internal component and an external one as well through creating relationships, attending events and meeting with members. The other thing that characterises this particular year is that we as an institution are undergoing some internal reorganisation. We are working with staff and the Governing Council to put in place an organisational infrastructure that will allow us to go into the future with a member focus and with a much larger, more articulated commitment to the public benefit. I thought that I was pretty familiar with RICS and its inner workings as I've been involved with it for quite a while, especially in a governance capacity, but this is a deep dive into how organisations are structured and what makes them effective. On the one hand, it's very challenging, but it's also exciting and interesting.
Can you share with us the key details of this reorganisation?
AG: We have ring-fenced our standards and regulation capabilities, so it's truly an independent portion of our organisation. So it's not as market-focused but rather acting as a very strict regulatory body. On the member side, we have really brought our overall mission towards sustainability and diversity, equity and inclusion, front and centre, giving them chair positions on our RICS board and making sure that that component of our operation is always very visible.
Talking about members, what do you think are the main challenges that professionals within your organisation have to face currently?
Tina Paillet: RICS carries out a number of sentiment surveys on commercial real estate, residential real estate and construction. A lot of people may think „Well, it's just sentiment, so it's quite soft”, but to the contrary, it has been tested that the sentiment surveys predict where the market is heading three to four quarters in advance. Unfortunately, the predictions today are showing that the market has probably peaked and is starting to fall from both an investment and leasing standpoint. I think the headwinds are coming, because interest rates are rising, and therefore, the competitive edge of real estate is being compressed. There are also headwinds coming from things like the climate crisis and there are a number of „new” issues that our members will need to be advising their clients and stakeholders on in order to meet the challenges. The good thing about it is that we are an organisation with 135,000 highly qualified specialists as members across the world who are able to advise on these matters. We see ourselves as the ”go-to” voice, the professional body for our members to advise on these very challenging times that are upcoming.
What are the specific challenges real estate valuers struggle with these days?
AG: The incorporation of the ESG component of property valuation into the appraisal process is very tricky. We are undergoing a consultation now in Europe to develop guidelines on how that can be incorporated into the valuation process. Traditionally, appraisals have been very backwards-looking, asking questions like: What's the history of the property? What are comparable properties that were sold recently? But the ESG component actually requires them to look into the future and evaluate the risks associated with ownership of that property, particularly in connection with climate change as Tina mentioned.
Speaking of ESG, how do you approach the topic and create your own strategy as an organisation?
AG: Tina was talking about our very large membership. Basically, we use those members shamelessly but purposefully to consult on technical matters. So to the extent that their practices are being affected by ESG concerns or challenges, we're able to consult with them and find out what are their challenges and how can we incorporate that into our guidelines and our standards.
Obviously, the real estate market is a significant polluter and therefore its professionals have a huge role to play in the fight against climate change. What kind of advice or best practices can you provide for them?
TP: We as the real estate industry are really responsible for over 40% of global emissions and for over a third of waste streams. You can't turn away from that. We have a real issue with dwindling resources. Our natural resources are not infinite and we need to be more resource-efficient when we're constructing our buildings, we need to be more cognizant of avoiding wastage. So I think the circular economy is going to be a real issue that needs to be tackled and embraced.
What you need to realise is that the standards, the guidance and the training, as well as the thought leadership that RICS developed, is actually a key value-add for all the stakeholders and the public benefit. And it is amazing how even small changes to guidance and standards can actually impact the way the economy moves. I'm going to take the example of our Whole Life-Cycle Carbon Assessment. The basic assumption is that wooden beams need to be incinerated at the end of their life which makes them an unfavourable choice. But what if you consider that the wooden beams can actually be reused? All of a sudden, it can spur an entire economy around wooden structures. This is the sort of change that could be very impactful and that's why we consult widely.
Our last Whole Life-Cycle Carbon Assessment guidance was put out in 2017. Since then, a lot of things have changed, and we've been working very hard to update that. We’ve recently put it up for consultation and we will publish the results soon.
AG: What RICS does is actually team up with large groups of collaborators, for instance, ICMS 3 (International Cost Management Standard). With collaborations like these, we're able to craft measurement standards that can work globally. Even though every country, regulation and methodology is going to be a little bit different, with measurement standards, we can incorporate all these differences into something that's meaningful on a global basis and responds to a global problem. The cool thing about ICMS 3 is that it allows you to actually measure the impacts of your decision-making while you're designing projects. Architects and engineers can use it, so you can actually predict the outcome on a carbon basis before you put a shovel in the ground.
Is the industry as a whole responsive to these standards?
TP: I was actually very surprised to see how widely it is adopted by the entire industry in Europe. The Whole Life-Cycle Carbon Assessment is basically considered the standard by which people measure carbon emissions in our sector.
You also need to also keep in mind that at a wider macroeconomic level, we have governments who are enacting carbon legislation and climate legislation and climate law, like the EU agreeing on taxonomy and the Green Deal. Almost 90% of corporations have adopted some sort of carbon-zero rule or net-zero goal for 2050. These are drivers that are going to be pushing everyone in the same direction.
AG: What I find kind of interesting is that in the United States, our government tends to have a „love-hate” relationship with ESG, depending on who's in charge at the moment. But at the end of the day, who's really pushing the agenda in the United States is the private industry. Investors are responding to a marketplace that's demanding ESG considerations in their investments.
You also mentioned putting the focus on diversity, equity and inclusion as part of the reorganisation of RICS. Coming from Central Europe, where companies, especially in real estate, really struggle with having more women in leadership positions, what advice would you give to them?
AG: Be different. Don't be that way. There's an enormous population of very qualified women and I also think that the next generation is going to look way different than the current one. There's study after study that proves that diverse leadership leads to better profits. So wake up!
TP: I totally agree. One of the things that will push towards more diversity is the war for talent. You can't leave over half of the talent sitting aside and not look at it when you're really looking to change and these talents are able to bring across strategic change within the industry. It is something you can't overlook.
To conclude, Ann, please tell us what legacy you'd like to leave your presidency with.
AG: A lot of this year is going to be about relationship building, setting a foundation for a new way forward. One of my legacies is actually to work with Tina side by side so that we can jointly look at longer-range projects and so that when she assumes the presidency next year, we get some continuity there. The other thing is, RICS is such a big tent with so many disciplines that if we can assemble and build an environment that can inform best practices, look out for each other and affect public policy as a strong group, I think there will be a tremendous legacy.
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