As decarbonizing buildings becomes essential to achieving net zero emissions goals, the real estate industry needs to rebalance its efforts away from new building in favor of retrofitting existing buildings, says Jeremy Kelly, director of global research at JLL.
Speaking on the REIT Report, Kelly said retrofitting has to become “the new normal” given that about a 10th of global emissions are coming from new construction.
JLL has calculated that in mature cities, 80% of office buildings that exist today will still be standing in 2050. That means a retrofitting rate of about 3-3.5% of inventory every single year to meet net zero targets. However, that compares with retrofitting rates that are around 1% today. “So, we've got to triple, quadruple the rates of retrofitting,” Kelly said.
The carbon impact of retrofits is typically around a third of new construction, Kelly said, and there are considerable energy efficiency benefits of 40-60% for a whole building deep retrofit.
During the interview Kelly also noted that:
- Retrofits are more viable when considered in tandem with broader asset repositioning that responds to factors such as changing workplace dynamics or health and wellbeing needs, social impact, and climate resilience.
- Retrofitting existing office buildings in premium sought-after locations “seems like a particularly compelling opportunity at the moment.”
- As carbon pricing becomes more of the norm that embraces the whole life cycle of a building, retrofitting will become the default solution.
- Progressive real estate investors and owners are doubling down on net zero carbon intervention in the knowledge that liquidity and pricing and access to debt are increasingly being influenced by a building’s emission performance.
- Early adopters of retrofitting will benefit from higher rent and reduced financial risk and improved access to capital at more favorable rates and better prospects at attracting and retaining tenants.
- Making retrofitting the default option will require upskilling the workforce, scaling technology, and fast-tracking new innovations. That will require much deeper partnerships between all stakeholders that are involved in the built environment.