Construction firms urged to rethink buildings as 'material banks' for circular gain
The construction industry has a great opportunity to enter the circular economy space by viewing buildings as material banks, a real estate developer has said.
Coert Zachariasse, who heads up his own Dutch-based firm Delta Development, outlined a vision where developers could take advantage of the residual value of materials tied up in commercial real estate by rethinking their business models.
Speaking at the recent Ellen MacArthur Foundation CE100 Annual Summit in London, Zachariasse said his industry was predominantly driven by selling square footage.
"Look at a building, there are hundreds of tonnes of valuable materials in those buildings. The residual value of those buildings and materials is a negative one - we have demolition cost and the valuation of commercial real estate is based on discounted cash flows. No-one takes [into account] the materials because [buildings] are not designed to be material banks," he told delegates.
Zachariasse's company started to design for disassembly by integrating the supply chain more to take greater ownership of material specification. At the start of a typical procurement and tendering process, suppliers are kept out of the loop due to negotiations on cost and legal issues - Delta wanted to change that.
"We wanted to have control over our materials so we turned around the system. We made a contract with all sub-suppliers. Instead of saying 'We want this quality, give us your lowest price', we made budgets for each part and said 'This is your budget, give us your highest quality and tell us what your product can do for the total quality of the building'," Zachariasse said.
By working more closely with suppliers, Delta was able to draw all of that data together into a single IT platform. The company now has 41 suppliers involved in the project and through this collaboration, has not only built a materials tracking platform, but lowered its material cost price.
The company also uses cradle-to-cradle materials, as they are already designed for disassembly. And this led to another unexpected benefit - the creation of a product-as-service business model through supplier material lease agreements.
"A large part of our buildings are now owned by individual suppliers and that gives us two things," Zachariasse explained. "It generates for us an immediate residual value of those materials because they are baked into that lease and second, it changes the way our financing works. This whole system changed our depreciation and investment returns - it creates different values in the materials."
Some of the economic benefits include increased flexibility and lower costs for changing interiors or workplaces. This in turn has led to lower total cost of tenancy as well as a reduction in real estate investment risk.
Zachariasse is now taking his aspirations to the next level with a new project - his company is building a national business research hub at Schiphol Trade Park to accelerate and enable the circular economy in Holland. The project has the support of the Dutch government, and will enable businesses to come together and collaborate in this space.