JSE-registered real estate investment trust Liberty Two Degrees (L2D) is beefing up its electricity generation supply to meet its environmental, social and governance (ESG) targets.

L2D development executive Melinda Isaacs says the company – which specialises in rental property in the retail, hotel and office space, with a portfolio valued at over R 8.2 -billion – is focusing on sustainability projects that have a good return on investment and will reduce operational expenditure.

The first 1 MW solar photovoltaic (PV) project was installed at the Liberty Midlands Mall in 2018, 1 MW was installed at Eastgate Shopping Centre in 2020 and a further 1 MW was installed at Liberty Promenade last year. An additional R65-million has been invested in another 4 MW of solar PV for Midlands Mall in 2022/2023, bringing the total installed capacity to 7 MW, with commissioning of this project expected at the end of July 2023.

The company is also expanding Gauteng’s Eastgate Shopping Centre’s power generation by 5 MW alternating current through its solar PV project in addition to the initial 1 MW completed at this property in 2020. This installation, together with a further 1 MW installation at Sandton City Shopping Centre, will bring the total installed capacity in the portfolio to 13 MW in 2024.

Isaac elaborates: “We are rolling out projects across the portfolio to focus on replacing water-cooled systems with air-cooled systems. Upgrading these older water-cooled systems with greener options will help us meet our sustainability targets, which will not only significantly reduce our water consumption, but also our electrical consumption.”

L2D is also exploring the implementation of water-harvesting projects to further reduce its reliance on municipal water.

Isaacs says the projects have been staggered in terms of cash flow. She says the company was ready to implement a net-zero waste strategy by the end of 2022, noting that the company is gathering datasets over 12 months to submit it to the Green Building Council South Africa, with the aim of receiving its net-zero waste certification before the end of 2023.

Isaacs stresses that ESG plays a vital role in how L2D approaches new developments, refurbishment projects and tenant fit-out projects, adding that the company committed to meaningfully contributing to society through its developments.

Consequently, L2D has implemented systems to enable it to monitor its ESG targets and contributions, as well as measure and allocate how its tenants contribute to its portfolio, adapting and outlining criteria documents and leases in line with its ESG goals.

Resilience, Adaptability

Isaacs notes that the property space is an ever-evolving industry, with revolving opportunities, and that the failure of service delivery by State-owned entities has forced owners to adapt and rethink the possibilities while creating new opportunities.

Had these circumstantial opportunities not presented themselves, there would perhaps not have been such a strong focus on spending capital on solar PV projects or reaching environmental goals as quickly.

“Growth, for me, lies in being resilient and flexible to change. As responsible property owners we realise that what we do now will impact the legacy we leave behind for the future generations. “Our purpose is to continue to create experiential spaces to benefit generations and this is at the heart of everything we do. “This means we never stop striving to improve and questioning: ‘Is there a better way?’," she adds.

She reiterates that the ever-increasing costs impact on affordability for tenants and the net income of landlords, making lease negotiations tough for both parties. This means that landlords may need to change the way they approach developments and how they allocate capital.

The South African retail industry is undergoing significant transformation in addition to the changes following the onset of Covid-19, namely the energy crisis, the rise of technology and changes in consumer behaviour, says Isaacs.

She explains that “these days shoppers are less predictable, better informed, more astute and deliberately demanding”, and that e-commerce and mobile shopping continue to grow.

“The omni-channel retail approach is creating a seamless shopping experience, with consumers possibly preferring window shopping online, but still preferring the personal interaction that brick-and-mortar retail offers. The rise in the ‘green consumer’ has placed even more importance on not only a sustainable product but also a sustainable environment in which to shop.”

The industry is not without risks, notes Isaacs, citing civil unrest, exchange rate fluctuations and the construction mafia as the “biggest risks” in development space.

She says that, from a legal perspective, smaller retailers are not equipped to deal with intimidation and threats, and that these confrontations cause major delays and disruptions at construction projects, leaving retailers with no choice but to surrender to the demands.

Isaacs concludes that property owners have been compelled to think about security hardening and being able to effectively secure their premises and that creating a safe environment for L2D’s shoppers is vital to its business.