CEE Summit: dealing with the €7 trillion retrofitting challenge

Retrofitting existing buildings will have to be an absolute priority in Europe but it could cost up to €7 trillion, Damian Harrington, director, head of EMEA research, Colliers, told the CEE Summit in Warsaw, organised by Real Asset Media and Poland Today.

“We know that 40% of global carbon emissions come from the built environment, but 80% of the existing stock is likely to be still in place by 2050,” he said. “The current rate of renovation in the EU is currently 1.2-1.3%, so it will have to double to 3% to reach the required target.”

This presents two challenges: first, getting the retrofitting done and secondly working out who is paying for it.

“The cost could be between €5 and €7 trillion, a lot of money,” said Harrington. “The average cost is 25% of the value of the asset, which is a very big number. It remains to be seen whether it is feasible and practical or whether policy has to change.”

Only 1% of stock in Europe is A rated, while 40% is A and B-rated, which means it will cost less to fix. The buildings that are in the worst conditions and will be most expensive to put right are 24% of the total, with 35% of stock falling in the middle.

Owner-occupied residential, for example, will cost the most to put right but it’s also the biggest volume of existing stock in Europe, followed by private rented resi and social rented resi. The volumes are smaller but a large percentage of assets in the industrial and logistics, office, retail and hotels sectors also falls in the most expensive category. 

Levels of embodied carbon are higher in industrial buildings

Whole life carbon combines the embodied carbon from the manufacture, transport and installation of construction materials and the operational carbon, the energy consumption when the building is being  used. In all buildings the two elements are almost equal: 49% embodied carbon and 51% operational carbon. For industrial assets, however, embodied carbon is 76% and operational carbon only 24%.

The good news in a difficult picture is that there are interventions that really make a difference. A case study of a UK office shows the costs of reducing CO₂ emissions by two-thirds: 70% of the costs are the “building envelope”, that is new insulation to roof and walls, reduced glazing or double glazing and new openable window.

Replacing boilers with high efficiency heat pumps, new chiller, air handling with fan power and demand controls represents 15% of total costs, while 10% of the total would be spent to introduce high-efficiency floor plates, LED lighting controls, terminal units and volumes control.

“An occupier change programme represents 5% of costs but can lead to 50% carbon savings, changing behaviour by increasing awareness in the procurement of equipment and giving correct usage guidance,” said Harrington. “So occupier behaviour is the low-hanging fruit.”