48 (143) 2021

Green Transformation

Real estate’s road to net zero carbon

By Sophie Chick, head of Savills World Research
Header sophie chick savills

With real estate responsible for almost 40% of energy and process-related emissions, a focus on the building and construction sector is inevitable. Tackling climate change should be at the top of every property owner’s and occupier’s agenda.

Evidence suggests the industry has a way to go. The Global Status Report for Buildings and Construction for 2019 noted that final energy demand in buildings remained at the same level in 2019 compared to the previous year but CO2 emissions from the operation of buildings have increased to their highest level yet.

Global building stock is set to double by 2050, according to the OECD, and more people across the globe are forecast to be living in cities. Urgent action by policymakers and investors is required to decarbonise and enhance energy efficiency in buildings. Increasing emissions and energy use are due to the expansion in floor space and rising demand for electricity, which is still primarily fossil fuel-generated, although this varies from country to country.

Forward-thinking developers and investors have been proactive in embracing key UN Sustainable Development Goals, creating portfolio-wide targets to become net zero and using design and technological advances in materials and monitoring systems to improve energy performance. Some have been led by market differentiation, remaining competitive and aligning with changing consumer and employee demands. However, all are also acutely aware that increasing regulation will come in this area.

Regulations to influence change
Policies regulating energy performance of new buildings are a powerful means to address future emissions growth. More countries are turning to regulation to effect change. India has introduced the country’s first energy conservation code for housing, while Rwanda is addressing its residential sector through a new Green Building Minimum Compliance System.

In addition, mayors of the world’s leading cities have emerged as champions of climate change through city-level regulation and proactive global networks, such as C40 Cities. For example, Paris has a net zero carbon goal for 2050 and Amsterdam plans to be fully electric by 2050.

Other countries are looking at how they can influence change within the construction process. The National Australian Built Environment Rating System (NABERS), widely regarded as world leading, has been compulsory since 2010 and created a marked change within real estate development. Japan and Canada want to use new policies to achieve net zero and net-zero-ready standards for buildings.

Innovation in construction
The network of World Building Councils has been promoting the development of new frameworks through its Net Zero Carbon Buildings Commitment. Technical innovation through modern methods of construction, such as modular building, can also save energy and costs through standardisation and use of materials. However, it is unlikely to just be regulation that drives change, as the largest players in real estate make it a cornerstone of future strategy.

Climate-related financial risk
For the largest investors in real estate, the impact of climate change is now also about the resilience of the location of assets, due to the physical risk of environmental incidents, as well as the buildings themselves.

As the industry faces these challenges, the forces for change will be varied. Investors will demand more action and consumer/tenant pressure is likely to increase. For building owners, looking at opportunities to mitigate climate risks through the lifecycle of their buildings will be a good starting point.

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