M&S Marble Arch: how should we make decisions on embodied carbon?
Making sense of the latest trends in property and economics from around the globe
4 minutes to read
"After almost a century at Marble Arch, M&S is now left with no choice but to review its future position on Oxford Street on the whim of one man. It is utterly pathetic."
That was M&S CEO Stuart Machin on July 20th after Michael Gove threw out the company's plans to re-develop its flagship London store. The proposals were initially approved by Westminster Council but were called in by Gove following publication of a report that indicated demolition and reconstruction would add 40,000 tonnes of extra CO2 into the atmosphere.
In calling in the project, 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. M&S said it had considered 16 different options for the site, from a light to a deep refurbishment through to demolition and found that retrofit was neither suitable nor viable.
Stephen Springham unpacked the implications in his note this week. The outlook for the site, should M&S opt to vacate, looks precarious:
"It is very hard to see any other retailer taking on the store in its current incarnation," Stephen writes. "Or any other retailer willing to take it on and retrofit … if M&S can’t devise any retrofit options that work, what chance does any other occupier have?"
Precedents
Mr Machin's quote about "the whim of one man" does get to the nub of an important issue: is a call-in by a Secretary of State the best method to resolve complicated questions on embodied carbon?
The whole saga highlights a gap in National Planning Policy and building standards, which don't offer detailed guidance on acceptable levels of embodied emissions, or give a proper definition of what they are for various materials. That leaves us lagging behind nations like France and the Netherlands, which already have systems in place that weigh up emissions from construction, maintenance, demolition, plus the energy used in any building's daily operation.
That gap might one day be filled. In May last year, an influential group of MPs argued that a similar system should be mandatory in the UK - one that would incorporate embodied carbon into both building regulations and planning policy.
It's on the radar, but almost certainly not imminent. I talked on Monday about the government's reluctance to make difficult decisions on environmental policy ahead of an election that must take place by January 2025.
House prices
UK house prices fell 3.8% during the year through July, the largest decline since 2009, Nationwide said this week. The price of a typical home is now 4.5% below the August 2022 peak.
Higher borrowing costs have knocked sentiment and forced buyers to recalculate their budgets but the property market hasn’t slammed on the brakes, Tom Bill tells the FT. Demand for homes should prove more resilient than expected between now and the general election, he said, pointing to the “cushioning effect” of wage growth, lockdown savings, forbearance from lenders and the popularity of fixed-rate deals in recent years.
That 3.8% annual decline will probably extend to about 5% by the year end. That would leave house prices up about 14% relative to where they were at the onset of the pandemic.
The stabilisation of the mortgage market that began a fortnight ago continued this week. NatWest, Halifax and Virgin Money joined a growing list of lenders that have cut mortgage rates in response to the improved outlook for inflation.
The prospect of stimulus in China
China's economic outlook is moving from bad to worse.
Annual economic growth slowed to 6.3% in the second quarter, which was flattered by lockdowns a year earlier. Quarterly growth of 1% is unlikely to last, given the fact that deflation is now a real risk and youth unemployment is running at more than 20%.
Still, Chinese property stocks have climbed more than 20% since July 24th, which offers clues as to how global investors think the government will navigate a way through the myre. Officials have so far held firm on any new fiscal and monetary support, and have instead urged banks to lower mortgage rates.
We've talked before about the scale of the real estate sector's influence on China's economy. Residential investment now accounts for about 10% of GDP, according to a 2022 report by The Bank for International Settlements (BIS). It's about half that in the US.
In other news...
Falling German and French inflation feeds hopes of halt to ECB interest rate rises (FT), UK mortgage approvals and consumer credit jump unexpectedly in June (Reuters), UK shop price inflation eases in July (Reuters), UK factory output falls at fastest pace in seven months, cost pressures ease (Reuters) and finally, Singapore's sky-high rents show the first signs of cooling (Bloomberg).
Photo by Daniel McCullough on Unsplash