An age-old solution to a modern-day problem

Given its sizeable contribution to greenhouse gas emissions, the real estate industry is grappling with 
how it can balance meeting the need for additional space as economies and societies grow with mitigating the climate crisis. Our growing economies need new and refurbished buildings but construction activity alone accounts for 11% of annual global carbon emissions according to the World Economic Forum.1  

Halting construction is unrealistic. What is needed is a new approach that both enables development and assists in reducing emissions. It may sound farcical, but the solution is simple. It lies in a material we have been using for millennia. You could say that we have not seen the wood for the trees.

You could say that we have not seen the wood for the trees

Timber: The potential is huge

Timber is a sustainable resource. It regrows naturally and sucks up carbon when it does so. Done correctly using sustainable forest management and a whole life-cycle approach, timber construction is net carbon positive, locking more carbon away than it produces. But that is not all. Wooden buildings provide a plethora of operational, financial and occupational benefits which mean they can enhance investment performance. 

Operationally, wooden buildings provide health and wellbeing benefits to occupants that concrete and brick buildings do not. Wooden buildings have proven to tangibly improve employee satisfaction and productivity. Timber is a flexible material which allows buildings to be readily adapted overtime without expensive refurbishment. It is a better insulator than brick and concrete.

Financially, wooden buildings are typically 25% quicker to construct than those made of other materials according to Think Wood, an industry educational platform.2 This is because they allow off-site prefabrication. An additional benefit of prefabricated construction is that it reduces construction traffic, noise and dust. Construction uses less energy too. 

[ad:content]

Assuming proper moisture sealant processes are following during construction, the lifespan of wooden versus concreate buildings at are at least comparable, although wood may last much longer. For example the Horyuji Temple, a timber building in Japan, has been standing strong for 1,400 years and counting.

According to Cromwell’s analysis, the health, wellbeing and sustainability benefits of wooden buildings mean occupiers will pay a premium to take space, equivalent to 10%. Void periods are shorter. This should translate into yield premiums over time, especially as investors are allocating higher weightings towards assets with the best ESG credentials. 

The beauty of wooden buildings is thus that return need not be comprised to secure environmental benefits. 

Deadwood: Common myths debunked

One challenge in the wider adoption of wooden buildings is the concern over aspects such as resilience to fire and moisture. In fact, timber performs well in both areas. 

Cross-laminated timber or CLT, the most commonly used timber construction material, is inherently fire resistant. It burns slowly and the external charring created as it does protect the underlying timber. For this reason, a large mass of wood, such as a CLT floor, is difficult to burn without a sustained heat source. Charring also ensures the structure retains its integrity even under severe heat which can debase other materials at comparable temperatures leading to collapse. 

Timber is suspectable to sustained high moisture exposure due to attack from insects, fungi or mould. It is hygroscopic, meaning it both attracts and retains moisture. This necessitates careful management during construction but it should not be a development impediment. CLT has the ability to shed water so simple techniques like development phasing and additional protection of exposed sections will minimise moisture risk. 

The key is sustainable forest management which ensures more trees are replaced than harvested

Another barrier has been the perception of cutting down trees cannot be environmentally beneficial. The key is sustainable forest management which ensures more trees are replaced than harvested. European forest cover is at an extent where such managed forests can easily offset harvested timber. For example, the timber used in a typical 5,000 sqm office building is re-grown within nine minutes in an Austrian forest.3 

Organisations such as the Forest Stewardship Council (FSC) certify that timber material is sourced from sustainably managed forests. Such forests confer other environmental benefits too. They can increase the health and growth of existing trees, better protect woodlands from fire, wind or pest damage, and aid biodiversity. 

As with many innovations that seem radical at first, rather than asking “can it be done?” we may soon be left asking “why did it take so long?

Head for the trees: The irrefutable logic of timber

Timber thus represents a renewable building resource that both achieves environmental objectives and makes financial sense. Investors who own or create timber stock can do their part in mitigating climate change whilst accessing real estate with favourable income and capital growth dynamics. It is a win for planet, profit and people.

As with many innovations that seem radical at first, rather than asking “can it be done?” we may soon be left asking “why did it take so long?”.

This article was written by Tom Duncan, Head of Research and Investment Strategy, Cromwell Property Group

1. https://www.weforum.org/agenda/2021/08/teaming-decarbonize-real-estate-city-governments-net-zero/
2. 4 Things to Know About Mass Timber (thinkwood.com)
3. Mass Timber office Forum: Capacity and Supply Chain  Summary Report February 2021 (Gardiner & Theobald )