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Reaching a Crossroads

September 17, 2020

Why the Commercial Real Estate Sector is Reluctant to Renovate

The real estate sector is at a crossroads.

Not only are buildings the largest energy consumer in Europe, the European Commission estimates that 75% of them are functioning inefficiently. As buildings quickly age, energy regulations continue to increase and we inch closer and closer to vital climate change commitment deadlines, those in the real estate industry are facing more challenges than ever before and are running out of time to act.

It’s clear that newly-constructed buildings will need to meet certain regulatory criteria, but what about the inefficient, outdated building stock that’s already standing? In the European Commission’s Comprehensive study of building energy renovation and the uptake of nearly zero-energy buildings in the EU, they estimate that 75% of current building stock will still exist by 2050. According to analysis from Buildings Performance Institute Europe (BPIE), “less than 3% of the building stock in the EU has an A-label” and “over 97% of building stock must be upgraded to achieve the 2050 decarbonisation vision” set forth by the EU. In other words, it’s essential that swift, comprehensive action is taken to renovate and ensure existing stock is living up to current energy-efficiency standards. Unfortunately, the European Commission estimates that current renovation rates range from only 0.4–1.2% across the EU.

 

If there’s such an enormous potential for improved efficiency rates and cost-saving measures with current building stock, why are those in the industry so reluctant to renovate?

The answer is just as complex as the buildings themselves.

Buildings are heterogeneous in nature and can’t be compared to one another easily. They serve different purposes, face different weather challenges and require different solutions. The majority of solutions on the market today are project based. Before any implementation can even take place, several months of analysis are required for each individual building and the installation of additional hardware is usually necessary. The result: High investment costs that won’t see return for several years.

Until this analysis has been completed, there is also no guarantee that a particular project is feasible or practical, as saving potential varies greatly from building to building. This makes renovation a risk in terms of both time and money.

 

So, what’s the solution?

The debate for whether current building stock needs to be upgraded has long been resolved. Apart from the clear environmental effects, the real estate sector is sitting on enormous potential when it comes to the advantages and benefits of improving existing building stock. Not only would it greatly reduce energy costs, upgrading to more advanced building technologies would also benefit building occupants, improving air quality and boosting their production. So, with clear advantages already on the horizon, what kind of solution is required to kick the real estate sector into high gear?

It must be time, energy and cost-saving.

In a nutshell, investors want to see quick, effective and immediate results.

Implementation should be simple, require few upfront costs and the benefits should be clear from the get-go. That means that a scalable building automation system is key. Scalability allows for building owners to avoid a tedious analysis and installation phase and can be adapted to a wide range of building types, sizes and functions with little effort.

Implementing Existing Solutions

At an average renovation rate of less than 1%, there’s no doubt that the priority to upgrade existing building stock needs to be shifted to the forefront if we hope to accomplish the ambitious goals put forth by the EU and the Paris Climate Agreement.

While it may seem like an uphill battle, the silver lining is that the solution is already there.

Self-learning, AI building automation systems have the potential to take the building sector from energy consuming to energy efficient, reducing environmental impact while simultaneously decreasing costs and increasing comfort for their tenants. If the untapped potential is any indicator, these building technologies will become the backbone of climate change initiatives, helping to turn outdated, inefficient buildings into more sustainable, energy-efficient and cost-saving investments.

 

To find out how DABBEL is helping lead the way in building renovation and sustainable solutions, click here.