Does net zero signal the start of the refurbishment era?

By Global Head of Tall Buildings Nick Clare and Director Mark Rogers

Developers are increasingly conscious of the risk of ‘brown’ assets becoming stranded. If they fail to persuade potential occupiers that their buildings can achieve net zero carbon across their lifetime, they may soon struggle to attract interest and asset value could be eroded.

Given their resource intensity and often high-profile nature, tall buildings are a particular focal point for developers grappling with this carbon conundrum. In the London market, where historically building tall has been seen as a sign of a thriving economy, new towers are increasingly being scrutinised through an environmental lens.

A growing business case for refurbishment?

A recent London Office Crane Survey shows a tip in the balance towards more refurbishment projects over new builds. As planners make decisions on how the skyline of the city is set to evolve, will a strong bias towards refurbishment emerge if London is to meet its ambition to be a zero-carbon city by 2030?

To answer this question, we have drawn together a data-led study to interrogate how refurbished and new build tall towers compare from an environmental and commercial perspective.

Using a comparative case study of a 15-storey, 22,500m² Gross Internal Area (GIA) refurbished and new build tall building in London (drawn from benchmark data), we explore the carbon, capital and schedule implications of both scenarios.

Comparing new builds and refurbs

We have centred our comparison (below) on the cradle to practical completion phases of a tall-build construction project.

To generate our insights, we have used our Carbon Calculator, developed to enable an early-stage assessment of embodied carbon.

Using our tool, we can calculate the carbon emitted producing a building’s materials, their transport and installation on site, as well as their disposal at end-of-life.

The London Energy Transformation Initiative (LETI) has proposed that buildings should have an embodied carbon budget of 600 kgCO2e/ m². This is a challenging threshold given that new commercial buildings typically generate 1,000 to 1,500 kgCO2e/ m² – with around two thirds of the total carbon embodied in the sub and superstructure.

Refurbs save carbon, cost and time

When comparing the new build and refurbished tall building case studies, our analysis found:

• A typical 15-storey new build generates an extra 600-700kg of CO₂ per m² compared to a like-for-like refurbished tower. This places it well above the LETI threshold.
• Offsetting this amount of embodied carbon at practical completion of the new build could cost around £1m in the current market, where the UKGBC price of carbon at £70/tCO_₂e is used.
• Where the new build uses low carbon concrete and recycled rebar, this still only saves around 150 kg/CO₂/m² from the overall material loading – a relatively modest impact.
• Substructure construction costs on a new build represent on average 20-25 percent of the overall shell and core construction costs – these costs can be largely saved by retaining and adapting the existing structure.
• Assuming a typical schedule of around 36 months on a 15-storey tower new build, refurbishing saves around 12-18 months from the schedule by eliminating the groundworks phase – gaining the owner an extra year or more of rental value.
• Refurbs could also ultimately reduce the time required for planning approvals if local authorities increase their favourability towards refurb over new build, adding to the construction schedule saving.

These numbers give an indication why refurbishment is becoming an increasingly popular choice for developers. Not only does refurbishing have the potential to achieve significant embodied carbon savings, but it also drives immediate, tangible commercial benefits.

The importance of whole life understanding

However, consideration of embodied carbon only tells part of the story. To deliver net zero tall buildings it’s crucial to understand how new builds and refurbs compare from an operational carbon perspective as well – building a complete picture of whole life performance.

While around 11 percent of the built environment’s emissions come from embodied carbon, the larger share of 28 percent comes from operational emissions (from energy used to heat, cool and light buildings). A large part of this is due to the inefficiency of existing building stock.

There is a widespread assumption that new builds offer greater potential to reduce emissions as they can harness the latest innovations and technologies. As an example of this, Landsec’s The Forge has set out to drive both embodied and operational carbon down to as close to zero as possible.

The Forge promises to be the world’s first new build, large scale net zero office building designed and constructed using a 'kit of parts' solution. The result is a structure that uses dramatically less material, creates less waste, and has a 19.4 percent reduction in carbon impact. This shines a light on the key role modern methods of construction (MMC) plays in making the construction industry build in a way that’s both leaner and greener.

However, refurbished buildings can also now achieve very high standards of performance. The retrofit market is rapidly maturing and we are seeing many real estate owners grasp the opportunity to upgrade and refit their existing buildings with better insulation and more efficient heating/cooling systems. Replacing the building fabric and services can make a huge difference.

The industry’s understanding of whole-life carbon performance is still developing, meaning there is currently a lack of definitive data and best practice to draw firm conclusions about whether refurbished buildings can perform as well operationally as new builds.

To progress further, our industry needs to share its learnings and data on whole-life carbon in a collaborative and open way. Without a holistic and long-term perspective on carbon impacts, the drive towards net zero will continue to be fragmented and myopic.

Leading the change

Regulation and policy have a key role to play in ensuring the real estate industry works together and takes concerted strides forward in reducing whole-life carbon over the coming years.

The London Plan 2021 now enshrines a requirement for developers of schemes referable to the Mayor to submit a whole lifecycle carbon assessment and demonstrate actions to reduce emissions. London’s leadership on this issue is a major step forward because it now means those building an asset must have an interest in its long-term carbon and cost performance. We may well see other cities follow London’s lead.

Understanding the lifecycle of the building from the outset should consider:

• Material production, provenance and transportation to site
• Anticipated energy performance of the building
• Ease of future dismantling and recycling
• Offsetting strategy

Improving the industry’s approach and understanding across these elements has the potential to unlock a full circular economy for construction where all buildings are proactively designed with potential future uses in mind. This will be a powerful force for change.

While there is a growing bank of knowledge and industry discussion about how to use greener building materials, optimise energy performance and plan for future uses, the industry’s approach to offsetting is comparably very immature. This may leave real estate owners exposed to unforeseen risks.

Rising offset risk

As our data-led study shows, whether refurbishing or building new, some level of carbon offsetting will be required. Offsetting is currently the most effective way to bridge the gap between current emission levels and net zero. However, these strategies are not a long-term climate fix.

Real estate developers need to understand the offsetting cost of carbon based on kilowatt hours across a 30-year period.

The current cost of carbon is around £70 per tonne according to the UK Green Building Council however this could increase to over £120 per tonne or more by the end of this decade. Given the slow pace of carbon action at present, high demand for offsets in 2025 and 2030 could lead to a supply spike and a further premium – particularly if there is a lack of quality offset schemes available.

The threat of price escalation and an over-heating offset market shows why credible offsetting strategies must become part of the core development appraisal process, rather than being seen as a bolt on or after thought, as they often currently are.

An offsetting strategy may be local, national, or even international; it is in a company’s gift to determine this, based on the commitments in their organisational Environmental, Social, and Governance strategy. The UK Green Building Council’s Renewable Energy Procurement and Carbon Offsetting Guidance for Net Zero Tall Buildings provides a useful set of principles to structure thinking.

An age of net zero innovation

While there are many questions still to be answered, an important dialogue has now opened about the comparative whole-life carbon performance of new builds and refurbished buildings – both routes have their own challenges and opportunities.

Until recently, the incentives have often been stronger to build new than to refurbish, but the balance is now starting to shift. To open up the opportunities that refurbishment offers, systemic change is still needed at many levels. For example, the 20 percent VAT levy on refurbishments as opposed to zero to five percent on new build still acts as a barrier. The Royal Institute of British Architects (RIBA) has now launched a campaign to level the playing field.

What’s clear is that the coming years are set to be an exciting period of discussion, learning, invention and action to dramatically reduce carbon emissions across our built environment.

Reaching net zero will require buy-in and engagement from all parts of the real estate industry.

Provided they can harness the best of new approaches to net zero design, construction and operation, both refurbished and new build towers will form part of London’s future fabric and speed its path to becoming carbon free.