“One of the things that Al Gore said, I actually asked him that question, is it ethical to make money, you know when the world has a problem like this? And he said, ‘Let me be very clear, NGOs are not going to solve this you know, so Green Peace, they can scream, Governments can change legislations but, in the end, there is only one thing that will make the needle move and that is if the companies change their products, if the buildings change, if the ships change, if the planes are made in a different way. All those things have to happen’ and he asked me, ‘What is it that you do?’ and I said well I’ve got a real estate company and he said, ‘Oh my god, 40% of carbon emissions come from the built environment.’”
Susan Freeman
Hi, I’m Susan Freeman. Welcome back to our PropertyShe podcast series brought to you by Mishcon de Reya in association with the London Real Estate Forum, where I get to interview some of the key influencers in the wonderful world of real estate and the built environment. Today, I am delighted to welcome Coen van Oostrom. Since founding EDGE in 1997 Coen has built the company into the largest commercial property developer and investor in The Netherlands, operating in The Netherlands, Germany, the United States and the United Kingdom with plans to expand into new markets. EDGE’s clients include among others, Deloitte, Unilever, Amazon, unclear 1.25, Rabobank and ABN AMRO. Coen is a global leader in tech enabled sustainable and healthy building development. He aims to radicalise sustainability through innovation. Galvanised by a meeting with Al Gore and his climate change documentary, ‘An Inconvenient Truth’, Coen became convinced of the green agenda, making it the company’s mission to deliver new standards of tech driven, responsible urban office developments. In 2007 he was named Young Global Leader at The World Economic Forum and in 2020 appointed Co-chair of The World Economic Forum Real Estate Industry Group. Whilst working towards a carbon neutral future with developments such as Valley and EDGE Amsterdam West, EDGE has developed 1.6 million square metres of sustainable buildings and has over €3 billion of projects in the pipeline across Europe. So now we are going to hear from Coen van Oostrom all about EDGE and the very latest in tech driven sustainable construction.
Good morning, Coen, lovely to speak to you and I have to tell the listeners that you are sitting with an amazing green hedge background, I don’t… is it, is it real?
Coen van Oostrom
It’s a real, it’s a real tree, it looks too perfect but it’s actually a real in-house tree that we use to have a better quality of air and quality of comfort and also sort of a sense of wellbeing in our office.
Susan Freeman
Well, it’s working, I already feel better so, thank you. So, I think you’re speaking to me from Amsterdam but I know that you’re just back from Davos so, it would be interesting to get your take on you know how things went because I know that you Co-chair The World Economic Forum Real Estate Group and I always feel that real estate doesn’t have enough of a voice at Davos, so I hope you’re going to tell me that this year it’s been different.
Coen van Oostrom
It is, it has been different, I think that real estate is growing, I think it is recognised that for some of the problems in the world and also some of the solutions, real estate is going to be very important. Of course global warming, almost 40% of carbon emissions come from real estate and therefore people are seeing that as a, yeah, a big important sector to influence and to see if we can get it on the right trajectory. Then again, I think that there were a couple of other topics, of course inflation, of course all the geopolitical stuff that is happening, maybe also the role of Europe was under debate, I think that a lot of people have written off Europe, maybe except for the Europeans, and that came to a bit of a bigger discussion around the IRA, the Inflation Reduction Act that the Americans have introduced and this is also relevant for real estate. So what is happening is that basically, if you want to make companies move in the right direction, you want to do it with carrot and a stick and what do Europeans do with the Green Deal, instead they have organised a huge stick with a lot of regulation and a lot of things that we have to do and a lot of punishment, for example, in a couple of countries in Europe you are not allowed to rent out buildings if they don’t have a certain energy level, so everybody’s busy with that labelling and how to organise that. What have the Americans done? They have just said, ‘Okay, we’re going to pump a HUGE amount of money into the market but you only get that money when you have made certain steps into a sustainable future, into an energy transition’. And guess what? The Americans are going to be so much more successful than the Europeans because they better understand how companies work and they are also totally okay if then some companies are going to make huge amounts of money doing that. Europeans have a different mindset, they rather control, they rather not have you know profits or excess profits for those kinds of companies and therefore you get a much more complicated way of working in Europe. And there were big debates in Davos on that topic. With basically Ursula von der Leyen screaming ‘Foul play’ about the Americans you know, incentivising companies to come there but I think that at the end of Davos, everybody was understanding well maybe also the Europeans have to wake up, see their own strength and maybe also have a different look at the way to work together with market forces and for real estate that could be a big thing because you see now that some of that IRA money is also going into the real estate industry, all kinds of tech solutions and sustainable solutions are basically coming from that IRA pot of money and that could be a big differentiator, we might see a real you know tsunami of retrofits coming online now.
Susan Freeman
That’s really interesting. And were there many real estate people at Davos?
Coen van Oostrom
I think percentage-wise, it’s still quite small but I would say that the Top 50 major players in the world were there and you know we talk about some of the big Chinese developers, the Indian developers and construction companies, a company like Hines was represented there etcetera, etcetera. So that’s a big group of people that is, that is visible there but it’s also, you know, if you go to a real estate conference, there’s a lot more real estate people that’s for sure.
Susan Freeman
Yes, okay, well it’s reassuring to know that they were there. I know you are one of a group of international real estate CEOs who have pledged to reduce building related emissions by at least 50% by 2030 and to be fully net zero by 2050 but I looked at the list and it seemed like quite a short list and I don’t know whether that was deliberately so because it was a particular group of people or whether it’s a question of the real estate industry not doing enough.
Coen van Oostrom
Yeah. We want to be absolute zero and not net zero in 2050, we think that then all the carbon should be gone out of our buildings, even the carbon that is necessary to make steel and concrete and all these other parts, so that’s I think a very ambitious goal. I think right now what we are seeing all across the world and especially also in Europe, is that there is a lot of interest to go on the sustainable journey but everybody’s asking themselves with what speeds, what will it cost and you know how can we organise ourselves? And you see that in big investors have basically all embraced this CRREM pathway that started by a couple of pension funds and a couple of big players and now it’s adopted more and more by all kinds of other players and they basically are saying okay, let’s start with saying what is the carbon emissions today and what is the plan to go there? We think that is too slow. We think there is not enough attention for embodied carbon and so if they buy a new building, basically taking into account how much CO2 is necessary to build the cement, steel and all these other elements, is yeah, a bit underrepresented in those models but at least the good thing is, there is a pathway, there is a plan to go from where we are to where they want to go and I think that’s very positive. The real estate developers are more or less doing the same. They also have all kinds of ideas about basically people now make a new building, what we can do is that operational carbon is close to zero and just the technology is there, the isolation is so good, we have solar, geothermal, all kinds of other solutions that help us to do, to do that. The problem for the real estate industry is that only a small percentage is a professionally organised real estate developer and there’s just no way that an individual can buy a plot of land in let’s say Spain, build a building and you know we can’t really say, ‘okay, you have to do that in a very different way’ unless we change the building code. But the building code is very localised, there is no European Union building code, it’s a Spanish building code and in many countries, it’s even the local code so the building code in Berlin is different than in Munich, for example. That’s one of the big issues, we would love to change that but at the moment there’s just no, no possibility in Europe to take that and centralise that and do that and get that in the right way and so therefore it’s a bit all over the place and luckily the big companies are now moving that in the right direction and I guess that more and more Governments are looking at that and saying, hey wow the initiative is no longer with us but it seems to be with a lot of companies that are pushing the bar higher than what we are doing, for example my company is now making buildings that are so much better than what regulation is describing, that it’s sort of funny that that regulation is still in place but slowly we are moving in the right direction.
Susan Freeman
And should real estate developers be working more closely for instance with the cities, with the mayors, to actually come up with new codes for carbon reduction targets? I mean, for instance, do you work closely with the Local Authorities in the cities that you’re active in?
Coen van Oostrom
I think that the most important question that you can ask and the thing is that there’s a distrust towards the real estate industry and that’s the reason that in many cities, the municipality is basically saying, ‘hey, if we talk to these people, we might get all confused and we might not care where we want to go so let’s do this in-house, let’s think about the code that we want to have and then we come and tell them what to do’. And what they don’t understand is that the real estate crowd is a big crowd, there are many different individuals there in their many different companies but if you select the right people that are leading the pack and that are, that are professionally organised and every city where we work and we recognise those players that are super serious, that get together in international platforms, like Davos, and all kinds of other players, spaces, and that are super committed to getting this done, if you engage with those people and you talk then about what is the building code that we should now enforce? So that’s ambitious for people but that they don’t stop working anymore in our cities because you also you have to build, you have to move forward. How can we make carrot and sticks that are so attractive that people are going to invest more in very green, sustainable buildings that are less? That would be number one thing that I would do. There’s a great example, New York had the, has the Real Estate Boards of New York and it’s an honour to be invited on that board and then you definitely cannot have any criminal background, you cannot have done all kinds of weird stuff with your tenants or whatever, you have to be a respected party to be asked for that. If I would be the Mayor of Berlin, if would be the Mayor of Amsterdam or any other city that we know where we work in, that’s the first thing I would do. A professionally, well run group of people that can take all the problems that we have. And then if you, it’s not only about sustainability, this is also about affordable housing, this is about how a building has a certain social influence in the surrounding in the community where it’s built then you can talk to these developers and say hey, how can we make sure that where you are doing something, where you are making money, there’s a community that’s benefitting from that. And then the developer might say, oh, I love that but hey, I actually need two more floors to do something but I am willing to give two floors to the community and open it up and we can have the schools that use the building during certain times or we can have music festivals on Saturdays in my atrium, there’s so many other things that you can do to make things work in a better way. Now there’s great examples for that but it meets on the basis that trust between the different parties to come together and make it work.
Susan Freeman
Yeah, that’s really, it’s really interesting because where a property company owns a whole neighbourhood, a whole area and therefore you know can master plan it with the Local Authority, it’s easier but what happens most often is that you have one building and you know you are doing the best that you can with one building but you know, let’s talk about EDGE and just so that our listeners get the feel of how it started and how you differentiate for yourself from other developers.
Coen van Oostrom
So, the company started about 25 years ago, I’m the founder of the company and I wanted to be a real estate developer, I liked business to business more than business to consumer and therefore I went to give the focus on office buildings. The office market back in the day was a little bit old school because the developers were playing Monopoly with locations and then building something and then when they build it they were looking for a tenant and I sort of had a feeling that could be done differently and I would go first to the tenants and see if we, you know we could seduce them to do a project with us and try to make them as happy as possible so that we would have more business coming from the same tenant and big tenants like Deloitte and Price Waterhouse Coopers and others, then started to work with us. Then in 2007 I met, we won a tender for a building, the CEO of the company was very mindful about sustainability and invited Al Gore to The Netherlands and he said. ‘Hey, going to do a CEO breakfast and my friend, you have to be there because you need some inspiration’ and I was sitting there and maybe you have seen what Al Gore did last week in Davos, that was a strong, passionate remark, ‘We have to move and we have to do it now’. He did that already in 2007 when I was there and it blew my mind. First, I didn’t realise that the world had a problem that was so big. Of course, climate change was happening and you heard about it but that it was a sort of really you know big thing and that it was actually true, that was for me still a new thing. And the second thing was that I was surrounded by 25 Dutch CEOs that were all raising their hands and said, ‘Yes we’re going to have green buildings, green cars, green planes’ and all the other things that you know have to go green and I was like, oh my God, this is the opportunity of a lifetime and maybe you know, you should fee guilty about it but I guess that one of the things that Al Gore said, I actually asked him that question, ‘Is it ethical to make money you know when the world has a problem like this?’ and he said, ‘Let me be very clear. NGOs are not going to solve this, you know, so Green Peace, they can scream, Governments can change legislation but in the end, there is only one thing that will make the needle move and that is if the companies change their products, if the buildings change, if the ships change, if the planes are made in a different way, all those things have to happen’ and he asked me, ‘What is it that you do?’ and I said, ‘Well, I’ve got a real estate company’ and he said, ‘Oh my god, 40% of carbon emissions come from the built environment so this is the low hanging fruit and it’s crazy that you guys haven’t started this already because you can just make money with doing this, even without subsidies and stuff, it’s just isolating a building, just makes sense’ and I was like oh my, wow, this is great and I went back to the office and I got everybody together and then it turned out that also in my company, we had people, we had a guy that studied physics and had worked for Green Peace but he never dared telling us because he was sort of afraid that in the yeah typical real estate, yeah the gung-ho group of people that we were at that time, that it would be weird if he would say that he was a specialist in measuring ice in the North and South Pole but we got him into the team and he turned out to be an amazing factor for finding out what our underlying technical problems, what are the solutions out there and we started to talk to all kinds of companies and within a couple of months we basically, you know were able to make buildings that have like 50, 60, 70% less carbon than what we had in the time before and so there was really a lot of low hanging fruit there. Well, then we made a building in Rotterdam that we made carbon neutral. We asked Bill Clinton to come and open the building. Bill Clinton became a fan of the company and Bill’s often – yeah, it’s too big a thing to say that he became a friend but maybe he became a bit of an ambassador for the company – asked me to become a member of the Clinton Initiative and so I was on stage a lot in New York and got to know a lot of people, also outside, outside The Netherlands and then we made The Edge building and that was the first building where basically we wanted to see if we could use technology to become better in measuring what is happening in a building but the frustration we have is that still in our buildings on Sunday, energy consumption was more or less the same as on Monday and you ask yourself, you know, why would we do that? Why not, if there’s nobody in the building, shut down some of the systems, can we make sure that not only buildings are more sustainable but also healthier and make sure that there are sensors there that can recognise if there’s six, seven people in a meeting room and create extra air or at least have a little light you know that comes on that says hey, this room is now not safe to work with anymore, open a window, that’s the sort of entry level of what you can do with a building. And we started to experiment with that, we made The Edge building and The Edge then became the metaphor for a new generation of buildings and I think that the whole real estate industry, yeah, maybe more or less in the worlds, came to Amsterdam to see that building. To be very clear, I don’t know if that was actually the best building was ever built but it got this, this message out there, there’s a new technology, there is a new platform that you can use to do things in a different way, it’s technology driven, it’s all about sustainability, it’s all about health, it’s about user, it’s also about fun, there’s a big atrium in the building, it’s like, it works like an intelligent square where people get together and suddenly, what you now see all around the world is that we are starting to make different buildings and I think that was a big, a big success and of course we are definitely not the only party that has been driving that but luckily we are one of the, yeah, forward looking developers that have been working on that.
Susan Freeman
And The Edge building that I visited is I think the, is it the second Amsterdam Edge building, the Edge Olympic and so I was lucky enough to have a tour of that so I sort of saw all this in operation and one of the things I noticed was you had reused a lot of materials, so I’m not quite sure what the original construction was that you started from but I know that on the floor, you know ground floor, there was material that had previously I think been used on the façade of the building, so was there quite a lot of repurposing involved in the construction?
Coen van Oostrom
Yeah, we basically have said that if possible, we don’t want to do newbuilds, we’d rather retrofit buildings. To be very clear, we will also do newbuilds going forward because in some locations that’s just the best ways you can do. In this case, we bought an existing building. There was a lot wrong with that building and we, you know we changed it and we had to take out the façade because the façade was so bad that we really had to do something with it but then we used the beautiful stone tiles that were on the outside, took them off and then used them again as the entrance level floor, so we put those tiles there and I think that is just beautiful to reuse the material in the same location and you know there’s a story to tell, people love it, they recognise it and that’s just something that is great and of course, you know it saves some CO2 by not cutting it out in a Chinese mine and ship it to, and ship it to Amsterdam, so that’s a great thing. What is also I thing that we find very important, is circularity and what we have done here is that we, not so much for the old building that we bought but the extension, we added two floors and those additions were done with the wooden system where basically the wood can be completely removed again and reused in other projects if in thirty, forty, fifty years, that is needed. And what we are doing is that we make a material passport and all the materials that we use in the building are basically mapped out and so when one day, we need to tear down the building, we know exactly what is there, what is the value of those elements that we have there, how can we reuse them, how can we take them apart and all that knowledge is centralised. It’s a bit of a long term solution to the carbon problem but I think that’s, let’s say human beings, as actors in the economic field, we need to start thinking about the long term and the long term is not only about carbon emissions, it’s also about the material you use, the lack of resources that we have in the world and as we all know, the world is growing in population still quite a bit and we have to start rethinking how we use our materials and do stuff and this is pretty much low hanging fruit because if you do that in the right moment, it's in the design process, you always start thinking, can we use wooden beams that we can also take apart again and maybe then screw them together in a different way? It doesn’t cost extra money, it’s just basically a no brainer.
Susan Freeman
And have you been able to reuse steel beams at all in any of your construction because I know that, that is beginning to happen?
Coen van Oostrom
Yeah. We haven’t done it in this building but what we now see is that in today’s market, steel has become so expensive that pretty much all steel, all aluminium etcetera is being reused and the trick is then to use that in the right way, for example you can also reuse concrete but the very often it is grinded and then used again building roads so that you can, oh, that’s not really a very positive way of using the material but more and more, bit of the material passport, we have the possibility to really analyse what kind of materials are there and how can we upgrade them and use them again? Whether you can then use them in the same building, is a little bit required question of timing. I would say in many cases that not really the case but we were talking to a steel company in Davos last week and then we asked them, maybe from now on, only want to buy steel that has been reused and he said, ‘well, that’s actually more expensive than new steel nowadays because everybody wants to have low carbon, reused steel instead of the new stuff’. That’s something that it is super interesting that you can really see that the mark started to shift and started to say hey, that new material is a bit of a no-go where possible, it is not black and white, there’s always materials that will be new but we can really reduce the percentage of new stuff that we use in our buildings.
Susan Freeman
And do you use offsets to cut carbon emissions?
Coen van Oostrom
Yeah, we, we have made a pledge and the pledge is that we want to be net zero with all our new projects. What does that mean? That means that our operational carbon is very close to zero. We hardly use any electricity anymore in our buildings. Of course our buildings don’t have a gas connection anymore so they are fully electrified but the amount of electricity is reduced to the max and there is really just a little bit left and that is being produced by renewable sources so there is no, yeah, carbon needed on that front anymore. The big problem we still need to solve is the embodied carbon, so the cement and steel. Today, we are 50% better than we were ten years ago, so the amount of CO2 in our product is 50% less. That is by building in wood, that is using what we call ‘bobble unclear 25.11’ sort of a concrete where the slab is not fully, let’s say 30/40 centimetre concrete slab but it has concrete in it but it all has other materials in it that make it lighter and that have a lot less CO2 in it. So all kinds of new technologies out there that we don’t invent ourself but we engage with the industry and we see if something works that we can see if we can use that as quickly as possible. Now, at the end if we then make a calculation of the amount of CO2 that was needed to build that building, we still end up with a certain, yeah, a certain damage to our nature and the two things you can then do, you can then say well, this is the best we can do and that’s it or you can say we’re going to price that and we use that internal pricing as well so that in the engineers that we have, they can choose between wood and concrete and other things but they know every gram of CO2 will have a price and then we buy offsets and so that we basically pay back to nature the damage that we have done and we hope that is going to be copied by other companies. We have the advantage today that more and more tenants are asking for it, they are saying we want to have a net zero building and we want to make sure that there has been no damage in this whole process. That has to do with the scope free elements that those tenants also have, they want to make sure that in their procurement of materials and procurement of the services that they need, that’s even going back to the mine where the stuff was created, we want to be 100% sure that all the CO2 has been reduced to the max and offset where possible.
Susan Freeman
Are tenants asking about air quality because I found it quite surprising after everything we’ve been through with Covid that people aren’t more concerned about the air quality?
Coen van Oostrom
What we notice is that there’s a small group of very sophisticated tenants that started with the big tech companies in the United States, the Facebook, the Googles etcetera but more and more also, for example big law firms in London, that are well organised and have professional facility schemes and they are asking for it and what you can see is now, it’s now spreading like a wildfire. This is not only about air quality, this is also about this embodied carbon. I would say that today in Germany, people might way what is embodied carbon? I am 100% sure in a year from now, in every RFP that we will get, the word ‘embodied carbon’ will be. It’s the same with that air quality. It also surprised us that not after Covid, everybody would already jump on that train but the real estate industry is a little bit a industry that leans on the past and that is well some people might say there are dinosaurs in there but what you see is that some facility managers just take the contract that they had ten years ago and you know throw that into the market again and that the sophistication that is in there, that could be in there, is not really recognised. However, we are asked to do a tender and we see that that sophistication is not there, we will try to educate people and say, ‘hey, you are asking for a new building, how can it be that you don’t give points in your RFP to people that make the air really clean and can prove that the air has a high quality’ and then quickly, you know education is so simple and you see that that will start to move. I have no doubts that in the next let’s say five years, all professional buildings, so every organisation that has a facility manager, will start to recognise this and will also start to think about embodied carbon, will also start to think about what is it that the building has to do to have people come back to the office so, all these different elements will come together in a much more professional, tender process than what we’ve seen in the past.
Susan Freeman
At this point, we should probably talk about the future of the office and obviously there’s been so much discussion about where we are going to end up. Do you think people will still want shiny new, new buildings?
Coen van Oostrom
So, I’m not sure they’ll want to have shiny new buildings, I do think that back in the day it would be ‘I need 500 work places. I need that at the right location and I need it for a fair price and the entrance should look great because if I have a guest coming in then they should be a little bit impressed by what I do.’ Now, I think that is over. I think that the central question now is, if we have 500 people in the city, in Amsterdam, in London, whatever, how can we make sure that these people want to come to the office because everybody is now recognising that if people are not in the office, they are not part of the culture, they are not a part of the team that can educate young people that just came in, etcetera, etcetera. There’s so many creativity, there’s the serendipity of talking to people in your organisation that you need in order to make an organisation successful. There’s many examples where people have organised that in different ways but in the core of most companies, it’s still that that office is going to be very important but the office was organised around those 500 work places and so you had 500 desks and then, yeah, maybe a canteen and you could get a sandwich and there were a couple of meeting rooms. What was not organised well in most of the offices in the world, is the communication of those people. Now what you see today is that in many cities in the world, people are not coming back to the office five days a week, they might work from home on Mondays and Fridays and they might be in the office Tuesday to Thursday. It’s, it’s a different situation in Asia, people are back full time and in some countries in the world, people don’t want to come at all but you could say that it’s not 100% from home and it’s also not 100% in the office in most countries but it’s partly there. Now, then you want to facilitate that when people are in the office, they actually communicate as much as they can. So the office has much more elements of becoming a club house than becoming that workplace that we saw ten years ago, with a big central core and then when you came out of the elevator, you saw a lot of desks standing everywhere and people working behind a desk. Now that working from a desk I think, yeah, why would you come to the office if the whole day you are sitting in a little cubical looking at your screen, then you can also stay at home and do your work from there but if you are in the office and you are doing a scrim session with your team where you sit together, you work, you go to breakout rooms and you come back again but then you have to organise your office around that scrim methodology and there’s companies that are very sophisticated and doing that now that really understand what are the processes in their companies that need to be fulfilled to have that creativity being unlocked and some companies are still searching for it. The conclusion that we have right now is that 80% of the offices don’t really fulfil that need, that new developed need of companies, with the bricks and mortar that they have and they have upgrade that, they have to change that to do that. So what we are seeing is that there’s a huge demand for the 5 or 10% offices that have that new way of working in them, that have that club house element in them and by the way, those buildings also have to be healthy, they also have to be net zero and they have a couple of other elements. So we see a premium that can go up to 20/25% in rental prices for that small percentage of buildings that are excellent and are out there to perform in that way and we will see a huge discount to buildings that are just old school, are not sustainable, are definitely not healthy and are also uninspiring, that people don’t really want to come back, take the commute in the morning for an hour, to sit in a desk like that.
Susan Freeman
And are you seeing people take less space than they would have taken before or more space because obviously it’s a different configuration?
Coen van Oostrom
Yeah, it changes per company and what you see in quite a lot of companies is that they are saying, ‘hey, on my Tuesdays everything is full and therefore I need all the space that I used to need because hey, I can tell people, you can come on Tuesday and the other person comes on Friday but it doesn’t really work and therefore I just keep the amount of square metres that I have’. What you also see is that there’s companies that say we need a lot more space with let’s say ping-pong tables and amazing coffee machines and other stuff and big atrium and so we need more square metres because we need to facilitate that but the truth of the matter is that there is a lot of companies also in this, let’s say crisis confinement where we are in an environment where often the CFO is responsible for real estate and that they are saying, ‘hey, why would we have a hundred thousand square metres when so many square metres are not being used during the day, let’s cut that back some’ and yeah, that we have to find a way that people don’t have their own desk but ask their App when they can work and when they can come in. So those people would let go maybe 20/30% of their square metres, however, they want to have an upgrade of all their other square metres. So overall, we believe that on the relocations, the bad real estate, we will see yeah, a lot of empty space going up quite a bit. We believe that the central locations and the best buildings will have more or less a waiting list of companies and then there will be a lot of developments, there’ll be a lot of redevelopment, even a very old building, for example we are looking at a building in New York at the moment, a typical midtown, huge central core, what we used to call ‘donut’ building. What you can do in these big buildings and we know them where you get endless batteries of desks on the floor, we’re going to make a couple of holes and we’re going to make beautiful staircases between the different floors so that people don’t feel that they are, yeah in the prison of their floor but that they have the possibility to walk around and see their colleagues on another floor. We will put the coffee machines in the staircase, we’ll put cushions on the staircase, so this staircase is a beautiful wooden staircase where it’s more like a lounge, a vertical lounge than anything else and that kind of design features are pretty much doable in all kinds of different buildings and that will be the future for these old buildings.
Susan Freeman
That sounds wonderful. And so we talked about offices and I wondered if you’re interested in applying the same technology and vision to residential. So I know your Valley development in Amsterdam is mixed use, so I am really interested to hear how that’s worked out because it’s mixed use in a financial area, so there must be lots of interesting learnings from that as how you make a financial business area into something that’s more mixed use.
Coen van Oostrom
I think that’s a… the urbanists in the world and municipality is now recognised that making a city that has a part where people work and another part where people live, doesn’t really make sense, if only because of all the congestion that you get going back and forth and it’s also just a lot of fun if every part of the city is vibrant 24/7 and seven days a week. And so also in Amsterdam where we made the Valley building, there used to be like a CBD called the South Axis and it was a little bit, yeah, empty on a Sunday afternoon and now they said, hey, let’s build a lot more residential. We want to tender to make a building that was partly office and partly residential and we decided to go crazy on the design and so, we stated to work together with MVRDV, Winy Maas, a Dutch architect that has done amazing, crazy stuff and we basically said, ‘hey, let’s have a building where you can also walk on the roof of the building’ and so it’s a building with three towers and in between the towers there is a 30 metre high, let’s call it a valley, that’s why the name Valley come from, and the staircase is up there and then you come drink a coffee and then you can walk on sports playing grounds on the other side of the building, so there’s a huge interaction, it has five restaurants, it has a museum, there’s a sky lobby, there’s a lot of stuff that you can do in that building and remember what I said earlier about doing something that is interesting for the community where you are building, this is an example where that is actually really is the case. It’s also the most beautiful building that we have made and so everybody who comes to Amsterdam and is driving over the highway, will see coming from Schiphol, this building and might think, oh I want to go in that building or go on top of that building and have a coffee and enjoy it. So, I think that it’s a lot of fun to do that and I think that the future is to make more of those mixed use buildings. The problem that we have is that often when we go, let’s say in London, there’s a plot of land and the plot of land allows us to make one skinny tower and in that skinny tower, if you didn’t want to mix different functions, it becomes more and more complicated so we will not always do this mixed use but sometimes just make an office building and the other time make a residential building. On the residential front, we see that sustainability is also playing a big role. In The Netherlands, there are now people that are paying as much energy costs as they are paying for their rents and of course we have to turn that around, we have to make sure that energy consumption is basically something where the building functions so well that you don’t really need a lot of that anymore and that is something that we want to do. We don’t see a lot of the health parts in residential buildings yet, I think that people are used to open a window when they need to and are happy with that but maybe that’s the next phase, that also with technology, we can make things easier, maybe we can win the trust of people. I think trust is a big issue in the residential environment, people just don’t want to have unclear 38.46 around them and they are not 100% sure what they can do. We have seen in Toronto where Sidewalk Labs tried to yeah, let’s say, supervise, control a certain area in the city and the people will just think like, ‘ooh, Google is watching over my shoulders and what can they see and what can they hear, we’re not comfortable with that’. So that will take a little bit more time and maybe there’s also limits to what we want to do there and also allow people to have their privacy but still there’s a whole bunch of things in the energy management and there’s a whole bunch of things in making sure that the quality of the air is right, the quality of the materials is used, there’s a lot of toxics that were used in the past in buildings, so there’s a lot of work that we can do without you know going and it’s privacy space that people want to have themselves and I think this is the area where we should do that.
Susan Freeman
It’s interesting because in offices now, tenants are asking, you know, they are asking these questions and they want the air quality and they want the sustainability, I’m not sure where in residential, that is happening and whether people are prepared to pay more for those functions. Now, you mentioned London, so it would be good to talk about your London projects and how you are finding working in our capital. So, I think the first project is at London Bridge, so it would be great to hear a little bit about that and whether you have started on site yet?
Coen van Oostrom
Yeah, a couple of years ago we bought the site there and it always takes a little bit of time in normal to get the zoning right. That has now worked out. We then negotiated different construction company for pricing. Of course then the War in Ukraine started, prices went up quite a bit and so that was a bit of a process to get to the right level and then exactly the week that we wanted to start and that meant, in this case, signing the contract with the construction company and say, ‘Go’ and now we’re going to jump, that was the week that the budget in the UK was being offered with Kwasi Kwarteng, the Finance Minister, yeah, making all these funny moves, which led to interest rates going up so much and we, between you and me, we got a heart attack, you know you need the little bit of stability if you invest in a £500 million development, you want to have an assumption what interest rates are going to be, you want to have an assumption what the sales price of a building can be. If within one day, interest rates go up by a hundred points, that’s, there’s not the environment where you want to invest in. Then again, if you are have been investing in a project for years and there’s a whole design being made and you’ve spent tens of millions already, you bought the land, it’s also difficult to step back and we had a feel well, it can’t get worse than this, it can only go better, so let’s, let’s do this and we are doing that project together with Goldman Sachs and they have been a very good partner for us and they are also very worried but we got together, we looked each other in the eyes and said, ‘hey, what is the assumption, where is the market going to be in four years’ and what I said earlier about you know if you have the best building in town, very sustainable, very healthy, a great place to work and you come into the market in a couple of years when there’s not a lot of other development, we still think it’s a great thing to do and therefore we took the decision to do it but it was, it was a very exciting moment and I’m very happy now that there’s a Government that is, yeah, maybe on the financial side a bit more conservative and taking care that those investment decisions can be taken.
Susan Freeman
Good, so we’re back on track and so the building I read was going to be twenty storeys, so quite high-rise, what I wasn’t sure about was whether it’s a repurposed building or whether it’s a newbuild?
Coen van Oostrom
It was a small building that was on the site that we couldn’t reuse. Also there, a lot of the materials, I would say all the materials, are being recycled and some materials we could reuse again in the building. It is a building I think that is going to be very interesting because what one of the things that we want to give back to the community is to have a ground floor that is accessible for everybody so, if you walk by, you come out of the train station and what you can do is walk into the building, you can have a coffee there, you can enjoy what is happening. So, these old school buildings that have a lot of marble, have also a security gate and then normally a guy standing there and telling you, ‘oh, who do you visit?’ and that’s not happening in our building. What we want, we want to have traffic, we want to have people in the building enjoying that, visitors, maybe people that want to open their laptop and work there a little bit on their way to a meeting in another building, so the flow is part of the energy that the building needs and also the serendipity of meeting people in the ground floor is there, yeah, very important part of what we are doing. It has also got to be very green and so it's going to be difficult to see what is now actually public area, what is the private garden that belongs to the building and what is the garden that is inside the building that we want sort of walkway, one flow around that building.
Susan Freeman
Looking at the visuals, it looks as if there’s actually a fantastic park sort of around the building, it looks very green.
Coen van Oostrom
Yeah, and I think that’s one of the things that we can give back to the community, the building was a building that had a huge fence around it, it was an immigration office and it had a very negative look and feel around it and we want to do exactly the opposite, we want to make it open and nice and friendly and a place where people you know think oh, I have to catch a train, I have maybe thirty minutes extra, I’m going to grab a coffee in that building because I know it’s such a pleasant environment. A second thing that we are doing in order to have a little bit of a social impact also in London is that a percentage of the floorspace that we have, we’re going to designate as social space and that means that you know of course we’re going to fetch high rents in the building but not for certain spaces, that space we’re going to rent out for a low price and what we are seeing in many cities in the world that the discussion around affordable housing, the lack of affordable housing, is not only in the residential part but also in the office part. Back in the day, an NGO could easily find a place in the centre of London and do its thing, get attractive rent, maybe not in the best building but in a still okay location and do its thing. Today, that has become so much harder and what we want to do and London as a whole is a partner in that, to see if by reducing the rents for a certain square foot percentage, we can attract some of those maybe NGO organisations, maybe other organisations who just can’t afford high rents and have them be part of the building community as well.
Susan Freeman
That sounds really good and when do you hope to have the building up and running?
Coen van Oostrom
So the construction time is about three years and so where are we now, in 2023, so I think in 2025 we deliver the building, then the promise is that it’s going to be the best building in town but yeah, I don’t want to make, I can make that promise or the assumption but we need journalists and our stakeholders to come in and check that out and say, ‘hey, we want to see the real data on the sustainability and the real data on the air quality and other stuff in order to make it work’. And that’s actually something that’s very important for us because there’s this debate about the best buildings etcetera and it’s going around and around and there are people that make I don’t know two trees on the roof of their buildings and they say this is a sustainable building, we need you know objective models and not only assumptions but also after the delivery of the building, real information, real data points that can prove if a building is indeed high performing or whether that is not the case. It also helps the owner to upgrade stuff that might not be working and it’s a whole new field of expertise so people make mistakes, we make mistakes, we have all kinds of sensors in our first building that didn’t work at all and then we had to change all of them, we have buildings that are so smart that nobody understands how to use it and therefore it’s too warm or too cold and tenants you know, look at me and say really, is this an amazing building, it’s too warm, too cold, I want to go back to my non-smart building from back in the day because then at least I knew what I was getting and we have learned a lot and we have upgraded our buildings accordingly and now we think we have a set that is really working but yeah, for the whole industry, it’s a learning journey that we are in and we have to be very transparent in what we’re doing in order to keep everybody on board.
Susan Freeman
And it has to be a willingness to experiment because otherwise, you know not everything is going to work perfectly the first time is it?
Coen van Oostrom
That’s the case, I think that that’s that willingness to experiment really has started the sustainability so we did not do anything about innovation before I met Al Gore, 2007, and afterwards, we put five people together and said you guys are the innovation team, I say guys but I mean girls and guys, there was a mixed team, and started to engage with the industry, with universities and see what is out there but innovation is crucial, making mistakes is also very important and we talked about trust earlier and there’s also this element that sometimes my engineers might say, ‘Coen, we can try this but if it doesn’t work then we will be late with the delivery’ and then the building might not be, you know, might not be delivered and then our cashflow is upside down and there is a lot of risk involved. We might then go to the tenants or to the investor and say listen, there’s a couple of things that have to work, you need light to work, you need an elevator to run, you need you know the roof has to be closed and you need the temperature has to be within two or three degrees of the ideal assumption. So, we are going to make sure that that is going to happen and so that you can work there but please allow us a couple of months to maybe change little innovations that we are doing and to make sure that those innovations might not be perfect on day one but that will be picked up in the weeks after, to get on the right level. And when we did the first time, we worked with Signify Lighting in the first Edge building, we were very much afraid that not all the light would be there at the right time and Deloitte, our tenant, they were very open and they said, ‘listen, we need light on a work place because otherwise we are not allowed to have a person working at a desk if they know there’s not enough light so we don’t care how you organise that but if the original innovation in light systems is not working out then just come up with an interim solution and please guarantee that after twelve months, everything’s working perfectly’. Well, in this case, it took two or three months to make it all work perfectly but Deloittes was totally okay in the beginning to experiment, actually their employees loved it because they were part of that experiment and they saw the improvements in the system and then it all worked and everybody was like yeah, this is actually a pretty cool place to be part of that innovation process.
Susan Freeman
And I know you also have a second site in London and I just wondered how, for you, London feels post-pandemic compared to other global cities that you are working in?
Coen van Oostrom
I’m a huge fan of London. I think that London is maybe had a little bit of a post-Brexit feeling in it that there was a question about it, a question mark whether it would be successful and it would still continue to grow. I think that I’m very sad that Brexit happened, I think that we need, as a continental Europeans, we need London to be very much part of it. I think also it is still part of it. We see a lot of companies that want to be there, the finance industry is very strong but it’s not only finance, it’s also technology, it’s also biotech, there’s so many engines that make London move and the spirit of the people is just extraordinary, just you know there’s no city like London in the European environment and therefore we are super happy that we are there, we like the professional attitude of companies. You know, if you call an engineering company in London and you say, ‘hey, we need software to measure the amount of carbon that, this whole embodied carbon discussion, the amount of carbon that is in the concrete, steel etcetera’, it’s like three, four companies that right away can say, ‘okay, we have the software, we tested it, it works, this is how it all works’. If you want to do that in Italy, they would look at you and say, ‘hey, we can, you know help you to design the building but that kind of software, that’s not what we have’ and so the level of sophistication in London is pretty much, yeah, the best in the world I would say. Therefore, it’s a great place for innovation. There’s a couple of things where we are engaging with the municipality to see if we can be quicker. There’s a couple of things where we engage with the municipality to see if building code could be changed because some building code is, yeah, I can say quite conservative compared to other countries, so it’s not always easy to innovate on the municipality side. I think the municipality wants that themselves as well and I think they are open for change but that is something that is needed. What is maybe my advice to the municipality of London is to really make a masterplan to say how can we retrofit all these older buildings, especially there will be quite a bit of office buildings that will be, yeah, non-performing, that will be empty for a long time and maybe they need to actively engage with the industry to see how we can not have a situation where these buildings are empty for five years but where pretty quickly people start to invest again. If you don’t invest and you make it residential, you need a zoning change that will take a long time, then you have building code that is in the way and so to engage and take away these roadblocks, would be something that would really, really help the market and help London as a city to be more successful.
Susan Freeman
Yes, I think that’s really good advice because we tend to focus a lot on the, you know the newbuilds and carbon reduction and then in London there is an awful lot of older stock as well. And in terms of going forward with EDGE, are you looking at other markets to expand into and what do you see as the next iteration of EDGE?
Coen van Oostrom
It’s a very good question. I think that’s a, for us, there are a couple of markets where we haven’t done enough. Paris is an obvious one because it’s only a three hour train ride from here and we haven’t done a building there yet so I hope that this year will be the year that we come to that. What I find interesting is that there’s a couple of cities where we worked already and that I would say really need us and that is for example New York. New York has, yeah, the opportunities but the problems maybe that also London has with a couple of buildings that are now 30% empty, 40% empty, but you cannot believe in New York is that there are buildings that still have single-pane glass and where there’s a huge energy installation pumping heat or cold in the summer and trying to get the temperature to the right level and that is like 21 degrees, seven days a week and 365 days a year, there’s no exception to that rule and but then with single-pane glass you just lose so much that it’s completely inefficient and we want to go in there and help those markets to do it and then that is one of the things that we are working on. Another thing, I use the time when things, yeah let’s say froze over a little bit after the War started in Ukraine, to make a trip and I went to Tokyo, I went to Seoul, I went to India, Middle East, and what you see is super interesting that with the technology that we have on offer and the buildings that we can make, there was a big developer in India that looked me in the eyes and said, ‘hey, we would love to make and EDGE building with you’ and I said, ‘hey, but I don’t want to develop in India because it sounds super scary to work in a completely you know environment that’s so different from what we’re used to’ and they said, ‘don’t worry, we’ll take care of building code, we will take care of zoning and getting building permits but we want your technology’ and we are thinking about making a joint venture and working together and then building an EDGE building in Bombay, Delhi, Bangalore etcetera and then when I tested that with a amazing developer that we met in Seoul, they said, ‘oh my God, we would love to do that in Seoul and we would love to have an EDGE building’. So there’s this weird idea in my mind and this might not be this year but that we could basically use the technology that we have, the brains that we have, and make the best building in Bombay and make the best building in other places. Then in Davos I got invited by a couple of municipalities by cities in the Middle East and they also want to push the bar, they just also have huge demands, a city like Riyadh wants to grow, has to grow like crazy. NEOM has been built in Saudi Arabia and what you are realising is that there’s just another mentality there than there is in western cities, western cities they actually are pretty difficult to get stuff done and what you see in the Middle East that they’re very welcoming and they really embrace the expertise that you can bring. Of course also there you want to work with a local partner because the cultural differences are just too big to do it all by yourself but in that context I think that it could be a future for us that most of our work in western cities, New York, London etcetera is going to be retrofit but that will be newbuilds in new markets, in new cities that are still expanding and that could be super exciting, super exciting to work in all fields.
Susan Freeman
That sounds really, that’s really interesting. And I think Macquarie have taken a stake in, and does that have effect on your strategy?
Coen van Oostrom
Yeah, quite a bit. I think that Macquarie, we basically decided to over a year ago that it might be wise for us to have a partner, we are doing very big projects on our own balance sheet and that is also part of a process where we don’t just want to be real estate developer but where we want to also be an investment manager. Normally we would sell a building at delivery but what you now see with these high technology buildings, is you want to stay close to those buildings in the first years of the building. Very simple because you want to educate the people but you also want to learn from the data that comes out of it and it’s just so much easier to do that if you are an owner of a co-owner or where you run a fund that has the building in it. It’s also the case that a real estate developer is always a little bit of, you run and then you stop and then you run and stop and of course we had a stop moment with the Ukraine War starting and if you have the recurring income of a funds, it’s so much easier to do than yeah, if you, if you yeah have to find your project case by case and I believe that it’s, for us now going forward, going to be so important to work in the fund environment and I think that’s when we then start to look for a partner that Macquarie was absolutely the perfect choice to help us to build that, I think they’re the biggest in the world when it comes to infrastructure, fin management and they have an amazing team that is helping us to, to talk to new investors, to look at the governance of investment management and how to set up those fund structures and to be successful in that journey. And so, yeah, it’s going to be probably new markets, it’s going to be probably a big focus on sustainability and it’s going to be in investment management markets, so there’s a lot of things coming towards us at the same time.
Susan Freeman
I think you’re going to have a very busy time and I hope that with all this interest in different markets, you’re still going to be focussing a lot on Europe because we need you. So, Coen, thank you so much, that was really, really interesting and I hope to see you at MIPIM.
Coen van Oostrom
I will definitely be there and looking forward to sit together and to brainstorm about what is next in real estate markets.
Susan Freeman
Thank you so much Coen, for talking to us about the exciting, cutting-edge technology you are deploying at EDGE and your plans for international expansion.
So, that’s it for now. I hope you enjoyed today’s conversation. Please join us for the next PropertyShe podcast interview coming very soon.
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