To create net-zero cities, we need to look hard at our older buildings

Retrofitting existing real estate is critical to cutting carbon emissions

November 07, 2022

Across the developed world, cities are dominated by under-utilized and energy inefficient buildings, despite many of them being less than 50 years old.

While they continue to be at the heart of daily urban life, these buildings’ carbon footprints and inefficiencies now present a huge challenge for their owners, policymakers, local authorities and communities.

In urban areas, buildings account for as much as 60% of overall carbon emissions. Urgent action is needed in cities if countries are to meet their net-zero targets.

However, the established model of demolishing existing structures and rebuilding is hard to justify; new construction brings its own issues of embodied carbon, material shortages and global supply chain pressures.

Rethink and retrofit existing buildings

Around 80% of buildings in cities today will exist in 2050 — we must urgently rethink the buildings we already have.

In its efforts to reach net-zero, the Global North must prioritize retrofitting efforts and ensure buildings are just as sustainable and energy efficient as they are desirable.

To do this, the industry needs to galvanise around measuring energy performance. Energy consumption targets are currently based on the energy use intensity performance of new builds, yet there are typically no such targets for existing buildings. In addition, embedding smart technology to capture data that informs the true performance of a building in real time should become commonplace.

Finally, we need to fill the knowledge gap we currently face by educating all stakeholders of the benefits and addressing the technical skills shortage to carry out the necessary retrofitting work.

While there is an undeniable urgency to decarbonize real estate and accelerate the move to net-zero buildings, retrofitting doesn’t have to happen all at once. It is a complex process and must consider a wide range of actions relating to embodied carbon, operational carbon, life cycle assessments, local energy grids, offsetting and change management.

In years to come, re-using materials will not only be more cost effective, but it will also be more in-demand. Many tenants are already starting to see retrofitting buildings as part of their wider sustainability approach alongside other resiliency strategies.

Already, there are good examples in the market of where retrofitting has provided the best economic and sustainability returns.

In Atlanta, JLL helped modular floor company Interface renovate a 1960s building, which led to total carbon emissions falling by half and 93% of waste diverted from landfill through initiatives to recycle and donate building materials. The project, which was one of the first in Georgia to achieve WELL Gold and LEED Platinum certifications, also improved employee wellness and created new spaces for collaboration.

Time for action

Real estate is at the start of its retrofitting journey. This decade will be crucial to kickstart the work that needs to be done.

To reach net-zero, we must significantly pick up the pace, from around 1% to at least 3% of stock per year — a tall order, considering the higher cost of finance and macroeconomic headwinds compared to recent years. Yet further inaction today will only increase the rates required to meet 2050 targets and heighten the risk that global warming will overshoot the 1.5°C target agreed upon as a target at COP21 in Paris, necessary for minimising the most harmful effects of climate change.

Demand for net-zero carbon buildings continues to increase, and the current imbalance in supply and demand will benefit early adopters of retrofitting by boosting rent and reducing financial risk while also making it easier to attract and retain tenants. Conversely, the rise in finance costs will only accelerate the re-pricing of assets that fall behind the curve; we are starting to see consistent signs of this in the market.

The penalties for buildings that fail to meet expected sustainability standards will increase sharply in the next three years amid ever-tightening regulations that target existing real estate rather than just focusing on new builds.

In addition, countries such as Canada and cities such as New York are implementing carbon taxes. As taxing carbon becomes more commonplace, it will become another cost line on utility bills and will be incorporated into energy prices, further making the business case for low- and zero-carbon buildings.

Developing new partnerships

While many aspects of successful retrofitting are about making physical changes to a building’s infrastructure and design, the human element cannot be overlooked. How buildings are used by the people inside them is a large part of their overall carbon footprint.

Tenants and building managers need to learn how to use the space effectively to reduce energy emissions, waste and water usage. Likewise, landlords and tenants must identify joint projects of value, share metrics on an ongoing basis and equitably distribute costs and benefits.

It doesn’t stop there. Suppliers, building operators, management teams, onsite teams as well as local governments, non-profit organizations and universities must work together to drive the transition to a low-carbon economy. Collaboration at all levels will truly be key.

The economic and geopolitical headwinds currently facing us all will exacerbate the need to put real estate on the right track, with a clear pathway to net-zero.

Many of today’s existing buildings are woven into their city’s history; it is time to upgrade them to be part of a more sustainable future.

This article was first published on the World Economic Forum's website as part of COP27 coverage.