Retrofitting buildings for a net zero future
The real estate industry must shift its focus from new construction to retrofitting.
The real estate industry faces the challenge of retrofitting buildings to reduce carbon emissions and achieve a new zero-carbon future. While the process may present economic difficulties, such as rising costs and labour shortage, progressive owners are embracing the idea that a building's emissions performance will increasingly influence its liquidity, pricing and debt. This shift towards energy efficiency in buildings is driven by rising energy costs and a recognition of the financial risks of inaction. Early adopters of retrofitting will reap the benefits of increased rent, reduced financial risk, improved access to capital, and the ability to attract and retain tenants in the face of a shortage of net zero carbon (NZC) buildings.
The current pace of decarbonisation will not meet the goals set by the Paris Climate Agreement, as retrofitting rates are estimated to triple from the current 1% to reach 3% of the global stock per year. This will require an investment of approximately US$3 trillion globally, alongside efforts to address the knowledge gap, upskill the workforce, and scale technology to accelerate the pace of retrofitting.
The steps towards decarbonisation are clear, including maximising operational efficiencies, electrifying heat, incorporating on-site renewable energy and sourcing local renewable energy, with offsetting as a last resort. However, retrofitting is a complex process that requires a holistic, long-term strategic approach. Collaboration between landlords and tenants can lead to new partnerships and business models, as well as co-investment opportunities. Tenant usage has a major impact on achieving NZC outcomes, which may disrupt the economics of existing leases.
The real estate industry must shift its focus from new construction to retrofitting and embrace whole-life carbon. By considering NZC retrofits in tandem with broader asset repositioning, the industry can respond to changing workplace dynamics, health and safety requirements, and the needs of tenants.
In conclusion, reusing existing buildings and upgrading them to be as efficient as possible is a more sustainable option than building new ones, with the added benefit of preserving cultural assets and minimising environmental impact. The real estate industry must take a strategic, collaborative approach to retrofit in order to reach the goal of net zero carbon and meet the requirements of the Paris Climate Agreement. Addressing the knowledge gap, upskilling the workforce, and investing in technology will be key to achieving this goal and creating a more sustainable future.