Partner content by ING: Building the office of the future

It took 30 years to get the land, but then also it took another 12 years to develop all the parcels into buildings on this site. We want to do this as sustainably as possible. How do we design and build a sustainable office environment? How do we create a community where there isn't one?

How does an area of New York City with lots of small undesirable buildings change to link them together beautifully and do that without simply knocking all those buildings down. Although it's more sustainable to repurpose an existing space than create a new one, upgrading the energy efficiency of older buildings can rarely match doing it from scratch. My name's Katie Prescott. I'm a business and technology journalist in London. The podcast showcases how some incredible business projects were created sustainably and the challenges that come with that. This episode is all about how you make tired 1980s blocks in the world's most famous city into an inspirational centerpiece that's praised by architects around the world. And just as importantly, how you finance it. This is Uncovered Sustainability. I'd like to welcome to the podcast Lisa Breylowski from Brookfield in Toronto, Canada, and Alex Pure, who works in real estate financing from ING. Now, look, before we get into the nitty-gritty of this particular project, you both have these enormous jobs in real estate. When you look at the long-term plan to rebuild this area, how do you begin to think about creating something that ticks all of the boxes in terms of sustainability, profitability, and makes people want to come into the office? Lisa, if I could start with you.

Well, the way we look at it is that remote work arrangements put in place during COVID were meant to keep people safe. Some places around the world like Asia, the Middle East, and Europe have seen office attendance return to pre-pandemic levels rather quickly, while US office return has lagged because many companies have been reluctant to require employees to return to the office on a full-time basis. It's become clear that despite this desire for increased flexibility from employees, business leaders recognize the importance of having a common place for their employees to gather, collaborate, and maintain a corporate culture.

Let's talk about this particular project of Manhattan West. And Lisa, I wonder if you could paint a picture for listeners about what it was like.

It took over 30 years to amass all the parcels of land that we needed to in this formerly industrial hub of Manhattan. It's a huge area bound by 31st to 33rd Streets and 9th to 10th Avenue in New York. The big thing that was there was 15 Amtrak lines. We faced a huge infrastructure challenge in developing the space. So to solve for these 15 Amtrak lines, we essentially built a deck atop these tracks that we installed over a 2-year period between the hours of 2 and 5 AM each morning to avoid train service disruption.

So you had this situation where a patch of land was crisscrossed with Amtrak lines that you had to keep functioning while you were doing building work. And the rest of the space, what was that?

Yeah, it was a mix of vacant land, commercial properties, industrial sites, um, those sort of, I would say, brown uses that we remediated and redeveloped into what's now, uh, one of the most sparkly neighborhoods in New York.

Alex, when it was presented to you, did you immediately buy into the project? Was it something that you could see the vision immediately, or were you slightly put off by the Amtrak lines?

No, maybe not, but it was a little bit of a scratching the head. I was like, okay, how could that work? So of course, as a banker, you are not an architect and not an engineer. We are doing the financing part. We're looking on the, on the economical figures and try to understand, okay, what's this project about? But we also have a view on the market and we also want to support the development of future places for living, for working, and also the infrastructure. It took over more than a decade to, to develop, to buy everything. And if you have a commitment for such a long time, you need to be very careful. Of course, it's a long period where you have to discuss, okay, what's the risk position we're having here? What's the opportunities? What's the challenges? So you have to do a lot of research, a lot of reading, a lot of, uh, yeah, talking to the client to understand, okay, what's your direction of travels and how can we help and support?

So 10 years ago, conversations about sustainability just weren't as mainstream as they are now. How did that factor into your decision-making at the time? Was sustainability a massive issue then when, when you were making these plans?

In the beginning, sustainability was not in the heart of this whole thing. It was just like, oh, we developed something new in the heart of Manhattan. And then it turned out that the sustainability part became bigger and bigger. So environmental and social and also governance was a huge part in the discussion also from a lender's perspective to get the credit approvals. But if you go 15, 20 years back in time, well, that, yeah, sustainability was, yeah, it's a bit green, or maybe there's something of solar. But this, so that's, that's a lot of things which developed over time. But in the beginning, it was literally like, okay, that's a big thing, let's start and let's see how it goes, honestly.

Yeah. And a big thing in Manhattan where I guess you, you sort of think real estate, well, it's probably a good financial bet, but, um, not necessarily when it's as complex as this.

Absolutely. And we have other projects in the world seen from other owners and asset managers and other cities globally. They took a significant hit, uh, vacancy rates went up significantly because people are not using these buildings anymore. And then you have also, from a lender's perspective, a lot of issues, uh, you need to tackle. And that's where we try to focus on things which have a good standing in the market. Sustainability is a key element, but also from an economics, from the location. And this is a project in a perfect location with a strong sustainability element, and it works and the people like it.

Now, could you explain, Lisa, what happened there from when the project was conceived and what the sustainability requirements were, I guess, from regulators but also lenders? And then how that's changed as we've seen sustainability rise up the agenda.

Sustainable development first came into mainstream focus in the 1990s with focus areas such as regulation, oversight, compliance, sort of basic, what we would think now, basic check-the-box type exercises. But fast forward to today where sustainability and development are completely interlocked. You can't do one without the other. Now we are focused on energy efficiency, greenhouse gas emissions, biodiversity, community-level impacts, and many more factors.

So was that quite a complicated process then, seeing how that has changed over the last decade?

Oh, very much so. The concepts of what it means to build a sustainable project were evolving as we were designing Manhattan West. So we had to stay right on the edge of what is cutting edge in terms of sustainability.

What sort of things did you have to look at?

Yeah, I'll use the example of 5 Manhattan West. So at one point, this building was known as the ugliest building in New York or the elephant's foot. But it has great bones. It has large floor plates. It has columnless floors for the most part. So we didn't want to knock it down and then just build anew. We wanted to keep the basic structure of the building, but make it look a whole lot better. By keeping the building's original structural system, we avoided 59% of the emissions that would have been created by building new. And interestingly, the energy performance of newly constructed buildings is only 5 to 15% lower than well-renovated buildings. So for us, it was an easy decision, hard to execute.

Hearing you talk about the most ugly building in New York, it sounds like you went through a sort of TV makeover program or something. Is it still the most ugly building in New York, even with its very sound bones?

It is one of the most attractive buildings in New York now. You wouldn't know that it was the same asset, you know, but for me telling you.

What sort of things have you considered when it comes to reducing emissions through other means? When you are looking at refitting old commercial space?

So what we're looking for is the ability to take an asset to net-zero greenhouse gas emissions. Brookfield has committed to being net-zero by 2050 or sooner. We focus on the or-sooner part. Right now, we're figuring out what this means at the asset level. So we are creating asset-level decarbonization plans. We believe getting to net zero for commercial real estate buildings will require 3 things. One, bringing in as much renewable energy as possible. Number 2, we're making property-level sustainability upgrades to lower our energy use. So things like swapping out LED lighting, upgrading HVAC systems, We re-clad the exterior to make it appear lighter and more modern and installed the latest and most sophisticated building energy systems. And last and very last, we will turn to high-quality carbon offsets, but we're not going to do that until we do the first two things. Some asset owners are buying their way to net zero through carbon offsets, but we're not. We're actually doing the hard work to support the transition to a low-carbon economy because we believe this represents a tremendous commercial opportunity.

Do people talk about the transformation of the building?

Absolutely. And within our business, we use this as an example of the ability that we have to tackle the hard projects, to keep the bones of a building and do a deep refurbishment focusing on building energy systems, but also the exterior of the building, what it looks like, what people see when they pass it by, and how that makes them feel.

Alex, from where you are sitting, do you think the trend is, as Lisa described, towards retrofitting, or are you seeing people rather building from scratch or perhaps buying their way to net zero? What does it, what does it look like from where you sit?

We have, over the past years, we have seen both. So it started of course with the new nice and shiny buildings with the top certifications, top in class, and everybody was focusing on it. Everybody wanted to buy it, everybody wanted to be the tenant in there. That's nice and that's easy also from a bank's perspective, but that's the low-hanging fruit to grab. But the transitional part, that's the even more challenging part. As Lisa just described, you need to think much more about the planning. You need to analyze the current situation. The existing building stock is huge. Circular economy is a big topic for the real estate industry, and we see it more and more in the market that people are trying, or companies are trying to acquire older buildings which are flexible, and they can then turn into something new and modern and energy efficient.

And Manhattan West, as Lisa just described, is a fantastic example of that. But what I want to know is, how does this then work from the bank's perspective?

For us, we also have a net zero strategy. We call it Terra. Terra is not only for real estate, it's for everything ING is doing ourselves and with our clients in the lending book. Then if you then say, okay, what is the top 1, 2, 3 things you need to do, it's exactly what Lisa just described. We have first and foremost reduced the energy demand of the buildings. We have to make the buildings energy efficient, reduce the consumption. The second step, of course, is renewable energy, put the solar panels on the rooftop. And the last thing is also on our list is the offsetting. But a real estate asset you can decarbonize. You start with the materials, you start with circularity, you start with the transitional part, and then you go into the operational phase and you make it smart and efficient, and then you have the right solution for the future.

I, I'd love to hear from you both now how you felt when you first walked into the space. What was it like for you when, when you saw it finished.

There's a buzz and a serenity to the place at the same time. You have sleek office towers, a high-end residential building, a buzzing new hotel, restaurants with outdoor seating, tons of greenery everywhere, curated retail. You, you really have everything. We hear from staff at the Pendry Hotel that the bar and the restaurants there start filling up at 3 PM and stay full every day until last call. Tourists are making Manhattan West their destination for its connectivity to Broadway, Chelsea, and Madison Square Garden. On any given day, we'll have pop stars, athletes, business tycoons, and, and us regular people too, eating at the restaurants, staying at the hotel, and doing business at the towers.

You must feel really proud, Lisa.

I'm very proud. It's incredibly gratifying seeing a project I've worked on for 10 years of my life come to be and to be used in the way we intended it to be.

Alex, I'd love to hear from you because we're talking about, you know, 10 years ago when you were approached for financing on this, you obviously believed in it, but you know, it's kind of the proof is in the pudding, as we say in the UK. What do you make of the pudding? What do you make of the result?

What I have heard from my colleagues, they really love the place. They really love what happened. They recall the time before it. And you mentioned the ugly duck in the city center, and now it's a, it's a beautiful swan. People want to go there. And that is exactly what we want to achieve. Yeah, we see so many great projects in the world happening with this strong link to sustainability, and it's exactly making me proud to say I'm part of this.

I think we need to plan a tour and a dinner at Manhattan West before the end of the year.

Let's—

I think we definitely do. Yeah. Well, as we've just heard, making sustainability a centerpiece when rebuilding huge areas of New York City wasn't just a case of let's add some solar panels here or save a concrete frame or two there. It was linking spaces together on an unprecedented scale in the city. With as low carbon impact as possible. And it shows when we build at scale, it's no longer an option just to go the cheapest way. Cost has to be blended with sustainability, or people just might not want to live and work there at all when it's built. Thank you so much to Lisa Breylowski from Brookfield and Alexander Pure from ING. We'll see you next time on Uncovered Sustainability. Society is transitioning to a low-carbon economy. So are ING's clients. And so is ING. It finances a lot of sustainable activities, but still more that's not. See how the business is progressing on ing.com/climate. Thank you so much, both of you. Lisa, I'm going to hold you to the tour and dinner.

Then you can show me which is your favorite spot at the bar.

All right, it's on.