According to a new report by ESG real estate platform Deepki, 88% of European commercial real estate asset managers plan to increase their spending on building retrofits over the next three years.
Of those planning to increase spending on retrofitting, 9% anticipate a substantial rise in their investment, while 12% will maintain the same amount.
The report is based on a survey of 253 European commercial real estate asset managers in the UK, Germany, France, Spain, and Italy with an estimated combined assets under management of €226.3 bn.
Currently, 42% of existing commercial properties require upgrades to achieve net-zero emissions and improve asset value, with retrofitting the preferred option over demolition and rebuilding as a solution for energy efficiency.
With 80% of 2050's building stock already in place, retrofitting existing commercial properties is crucial for achieving environmental standards and attracting tenants who prioritize sustainability.
A strong majority (87%) of institutional investors view retrofitting as a means to enhance asset value, leading them to actively seek out poorly performing buildings for renovation and improvement, while only 8% said this was not currently in their business plan.
Improved building insulation to reduce energy consumption is the top priority for retrofitting, as mentioned by 68% of companies. Optimizing the regulation of lighting, heating, ventilation, and air conditioning equipment was the second most important priority, cited by 61% of the companies.
Other retrofitting strategies include upgrading equipment to more efficient models, such as heat pumps, which were chosen by 51% of respondents. 41% of businesses plan to use renewable energy sources like solar panels, and 21% are switching from fossil fuel-powered equipment to electric-powered alternatives.
The main reason for businesses to decarbonize their real estate assets is to meet the needs of building occupants, with 66% of respondents citing this reason. Other motivations for reducing greenhouse gas emissions include complying with new standards in various European jurisdictions (57%), financial reporting requirements (51%), and meeting net-zero targets for 2030 and 2050 set by their governments (43%).
However, businesses admit they lack the necessary internal expertise to transform these buildings into modern, energy-efficient structures. Over a third (36%) rate their current retrofitting expertise as ‘average’ at best, and only 2% consider it ‘excellent.’
Deepki’s ESG platform for real estate uses data to guide companies through their net-zero transition, from data collection and reporting to defining ESG strategies and implementing decarbonization plans. The SaaS solution utilizes audit-ready data and virtual retrofitting capabilities to enhance asset ESG performance, maximize asset value, ensure compliance, and facilitate access to capital.
