Financials to drive Europe’s retrofit push

Financial considerations are becoming the driving force behind Europe’s decarbonisation of real estate, according to Aleksander Grabecki, counsel at CMS.

Speaking to Real Asset Media at EXPO Real 2025, he said retrofitting is now the only viable route to meet looming EU climate deadlines.

Grabecki said landlords face a tight regulatory window. “The EU is pretty clear about all the buildings needing to be net zero in 2030. It’s in five years, basically; it’s one lease cycle away — not much time.”

He added that “80% of the existing buildings will be with us until 2050, so much longer”, meaning new developments cannot replace enough stock to meet demand.

He pointed to the sector’s carbon footprint. “The built environment is accountable for 42% of the carbon emissions worldwide… and two-thirds of that is really operational carbon footprint, and only one-third is the embodied carbon footprint.”

This means, he said, that “construction and demolition of the buildings is only one-third, and two-thirds is the energy bills, water consumption, things like that, so it’s decades of bills being paid”.

The financial case for retrofitting now aligns directly with ESG outcomes. “The conclusion of that is that we really can do it and should do it from the financial perspective… so basically, caring about the melting icebergs is also caring about the Excel of the financial fund.”

Digital tools are strengthening the link between emissions reduction and operating costs. “Now with AI and much more digital tools like building information modelling (BIM), and things like that, real estate agencies offering services like plug-ins to building management systems (BMS), allowing you to cut costs for some savings that could translate into rent increases; it really creates a good environment actually to tweak with the ESG credentials.”

He said the key message from the market is clear: “This is the key takeaway, when we can basically marry the financials with caring about the climate.”