Dive Brief:
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Municipal policies that encourage energy-conscious building upgrades are the most powerful catalyst for accelerating retrofits, a new report from Economist Impact and JLL found.
- An Economist Impact survey of 1,000 senior executives from across the built environment in 12 cities worldwide found that 63% are aware of their city’s retrofitting policies; 55% believe stricter codes would accelerate retrofitting in the next five years, while 52% believe more generous incentives would do so.
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“Momentum is growing for demand-driven retrofitting, but adoption is far from where it needs to be,” Cynthia Kantor, CEO of project and development services at JLL, states in the report.
Dive Insight:
Building retrofitting to reduce or decarbonize energy use “is central to cutting emissions, improving energy efficiency, nurturing public safety and well-being and optimizing urban space,” the report states. In addition to their carbon footprint benefits, retrofits are “providing robust premiums for developers and investors, and creating better spaces to live and work.”
Nearly half — 47% — of survey respondents said retrofitting is more effective than new construction to meet urban space needs.
The ways people work and what they want when they’re occupying buildings is changing, Kantor said in an interview. Available space that fits those needs and works within current regulatory environments is increasingly less available.
“The demand is there for sustainable space, but the largest reason it hasn’t progressed in a greater velocity is because of the near-term financial [impacts] for the investor,” Kantor said. “So, the regulatory environment has to have incentives that go with it and a more comprehensive view of return on investment as well.”
The survey found that mandatory building performance standards and public financial incentives are significantly accelerating commercial and residential retrofits. Cities that integrate these with public sector retrofit leadership and targeted incentives “are better positioned to close the retrofit gap,” according to the report.
Mechanisms like green bonds, energy performance contracts and shared savings agreements are critical to mobilizing private capital, the report states. But inadequate policy frameworks in many markets are hindering retrofits; 43% of survey respondents said unclear or insufficient regulation and standards get in their way.
Because a building’s location is a key reason it can lose value, revitalizing entire sections of a city might be necessary to make the math on a retrofit work, Kantor said. “The need to intermix live, work and play is a more and more important trend for the future. This challenge and this opportunity are bigger than an asset, and I think the city leaders who get that and can build strategies with partners in their cities are going to win.
