With the built environment accounting for 25% of the UK's greenhouse gas emissions, there is a recognition in the Real Estate industry of the key role it must play in the UK's drive towards net zero and ensuring it delivers on its climate change commitments. The use of sustainable business practices is a crucial focus area for the industry and in particular, retrofitting and repurposing are high on the property agenda.

Retrofitting

Retrofitting a building simply involves changing its systems or structure after its initial construction and occupation, and in the context of sustainability, this means to reduce its environmental impact and improve its environmental performance. There is a sliding scale of retrofitting, ranging from soft, relatively inexpensive retrofits, to harder, more costly and invasive structural overhauls. Examples included:

  • Replacing halogen light bulbs with more efficient LEDs
  • Replacing old windows/glazing to conform with higher standards on airtightness
  • Installing heat pumps in place of traditional gas boilers
  • Installing solar panels and/or rainwater harvesting systems

Retrofitting a building contributes towards lowering greenhouse gas emissions and conserving natural resources, yet, beyond the clear environmental imperative, retrofitting also brings a host of other benefits:

  • Cost savings: energy and water efficiency measures result in long-term operational cost savings for both building owners and occupiers, which also makes them more attractive to occupiers and easier to lease, so lower void rates.
  • Increased property value: it is estimated that retrofitting can add 15-20% to a property’s value due to their environmental benefits and lower operational costs; meaning owners can secure higher rentals.
  • Funding: funders are supportive of assets that have been retrofitted as it's an opportunity to hit their own 'green targets' and respond to regulatory and social pressures relating to ESG.
  • Future proof: retrofitting helps owners future proof their assets against new legislation that may require certain environmental performance standards to be adhered to.
  • Health & wellbeing: sustainable buildings lead to healthier and more comfortable spaces for occupants.

Repurposing

Repurposing a building involves using existing real estate for a purpose other than what it was originally constructed for. By reusing existing RE assets, instead of building new, it means natural resources are not depleted, and the environmental and surrounding ecosystems are not damaged from construction site related pollution. There is also the obvious cost saving; the capital required for constructing new far outweighs any costs associated with repurposing existing assets.

It is clear repurposing shares many of the same benefits as retrofitting (e.g. reduced environmental impact and cost savings), however it also has the following unique benefits:-

  • Respond to changes in how we live post Covid: with increased hybrid working, accelerated on line shopping, and a greater emphasis on experiential mixed/use destinations, repurposing enables the RE industry to respond to how societal real estate needs have changed post Covid.
  • Respond to global challenges: Brexit and various geopolitical issues and conflicts have disrupted supply chains, made certain resources harder to option and caused volatility in energy markets, which makes constructing new even more costly and risky.

Challenges

Whilst there are compelling environmental, economic and social arguments to support repurposing and retrofitting practices, unfortunately there are challenges which limit their widescale adoption. There is a lack of governmental policies to upscale and incentivise retrofitting and repurposing schemes and regulatory reform is essential to drive them forward.

Another obstacle is that owners and occupiers are not always aligned in their thinking and actions. For example, a building may be repurposed or retrofitted with circular economy principles in mind, but the occupier does not implement such principles is their fitting out works.

A further challenge is that there is a misconception of the high initial costs for retrofits and tension between owners and occupiers over who should incur these costs, with each party respectively thinking the other should foot the bill.

Notwithstanding these challenges, the positive case for repurposing and retrofitting is clear. Not only can these practices be used to secure the long-term sustainable use of existing assets and decarbonise our built environment but they also bring about a host of other social and economic benefits for land owners and occupiers alike. As the drive to net zero intensifies, it is imperative that landowners, occupiers, policy makers and the RE industry at large come together on a collaborative basis to overcome the challenges and create a social and regulatory landscape which is conducive to their wide scale adoption.

    Contributor

    Sara Bastekin

    Senior Solicitor