Research by the international real estate advisor, as part of its Impacts thought leadership programme, has found that the increased maturity of local ecosystems of companies to recover and trade reclaimed materials is potentially making redevelopment a more carbon-competitive option in some cities. It has created the Savills Material Reuse Maturity Index to show which major office markets have the most advanced environments for material circularity, based on recovery and re-use rates, the presence of companies and facilitators to deliver the process, and the presence of supportive local regulations or policies, with London, Amsterdam and Paris coming top.  

However, Savills says that a retrofit remains the best option in most cases to reduce offices’ embodied carbon, and the cost of a deep retrofit or full redevelopment project remains substantial, although long-term the latter may deliver rental uplifts to help offset the investment. It says that the scarcity of premium office space in some markets means that high-quality deep retrofits can command significant rent increases. For example, successful projects outperformed average rental growth by 57% in Madrid and 67% in New York over an average four-year time frame.

Sarah Brooks, Associate Director in Savills World Research, comments: “When considering a retrofit against a redevelopment, building owners balance many factors including capital expenditure, length of vacancy, planning risk, exit yields and potential rental increases. While a building optimisation programme or a light-touch retrofit to meet immediate compliance and occupier requirements may cost under 2% of the building’s value for the latter or 3-6% for the former, the costs and risks of other interventions – such as deep retrofit or a full redevelopment - are significantly higher, although the rewards can be greater too.”

Joanna Conceicao, Director, Savills Earth, adds: “Office owners are faced with an enormous upgrade challenge to get their stock in line with regulatory requirements and market expectations. In many markets, the majority of overall office stock is at risk of non-compliance with upcoming or proposed minimum energy performance standards. Western European markets face a more immediate challenge, reflecting a relatively older stock profile and more stringent legislation on the horizon. Elsewhere, these challenges will rise up the agenda as stock ages and policies evolve. While retrofitting is still the right solution for most existing buildings in terms of whole-life carbon, it’s encouraging that several major cities are advancing circular material economies which will help close the carbon emissions gap on projects where redevelopment offers the most adaptable and long-term resilient option.”

-ends-

Notes to Editor:

Decarbonisation pathway definitions used by Savills:

• Building optimisation involves simple, low-cost improvements such as upgrading building management systems or installing lighting sensors. They cause minimal disruption to tenants but rarely bring a significant uplift to a building’s performance.
• Light-touch retrofits deliver moderate energy performance upgrades without significant changes to the building fabric or core services. Offices remain occupied, but there is some disruption to tenants.
• Deep retrofits are major upgrades to a building’s fabric and core systems, which can include reconfiguring layouts, electrifying heating systems and upgrading ventilation and cooling infrastructure. They are capital-intensive and require tenants to move out for some or all of the time, but can cut carbon impact by 40-70%.
• Redevelopment involves demolishing existing offices and replacing them. It brings the greatest reduction in operational carbon (the emissions generated by the energy used to run the building), but has the highest cost, delivery risk and embodied carbon (the emissions generated by a building’s materials and construction).