Retrofitting buildings essential to reduce energy costs and combat the global energy crisis

Rhea-AI Summary

JLL's recent research highlights the urgent need to triple retrofitting rates to meet the Paris Agreement's 2050 decarbonization targets, particularly amid rising energy costs. The study reveals that retrofitting can enhance building value through increased rents and occupancy rates. It estimates a $3 trillion investment is required in the office sector to achieve these goals. Collaboration among stakeholders is crucial to transition to low-carbon economies effectively. The findings emphasize that retrofitting is both a viable and responsible strategy for sustainable real estate management.

Positive

• Retrofitting can increase rents and tenant satisfaction.
• Aligning stakeholders can create significant value in sustainability investments.
• JLL estimates that $3 trillion is needed in the office sector to meet decarbonization goals.

Negative

• Current retrofitting rates are only 1%, needing to rise to at least 3% per year to meet targets.
• Failure to decarbonize poses significant financial risks for real estate assets.

Research from JLL finds that retrofitting rates need to triple to meet the goals in the Paris Agreement

CHICAGO, Nov. 10, 2022 /PRNewswire/ -- As businesses grapple with the current energy crisis and prepare for it to worsen, new research from JLL (NYSE: JLL) finds that these rising energy costs are expediting the move toward more efficient buildings.

JLL's Retrofitting Buildings to be Future-Fit research reveals that net-zero carbon (NZC) intervention measures directly impact a building's bottom line and that failing to decarbonize leads to significant financial risk. For many buildings, meeting 2050 decarbonization targets put forward in the Paris Climate Agreement is grounded in retrofitting current spaces, which can also garner higher rents, reduce financial risk and generate higher occupancy rates and tenant satisfaction.

"Retrofitting existing buildings is the quickest and most cost-effective way to accelerate decarbonization in the built environment," said Guy Grainger, JLL global Head of Sustainability Services and ESG. "Whether it is lenders on real estate or occupiers of buildings, requirements are changing and real assets will become illiquid unless there is a plan to transition them."

JLL's research reveals that in the global north, retrofitting rates need to triple from barely 1% today to at least 3% of existing buildings per year to meet decarbonization targets. An estimated US $3 trillion will be required in the office sector alone to meet these targets. In the developing world, new commercial and residential real estate will need fresh approaches prioritizing carbon and energy efficiency to improve resilience to climate change and contribute to a more sustainable future. Addressing the knowledge gap, upskilling the workforce and scaling technology will be critical to accelerating the pace of retrofitting.   

"Retrofitting does not need to be an all at once endeavor. But, reporting and disclosure is not enough - this requires intentional investment and a strategic approach," said Grainger. "Retrofits are both more viable and responsible when considered in tandem with broader asset repositioning that responds to changing workplace dynamics and climate resilience. We have enough proof points that show we have been underestimating the return upside of intervention and underestimating the value downside of inaction."

Retrofitting buildings to be more energy efficient will also require owners and occupiers to deepen relationships and form new business models to gain the significant value they both have when investing in sustainability. The alignment of stakeholders extends beyond just the landlord and tenant as suppliers, building operators, management teams, on-site teams, and even local governments must work together to transition to a low-carbon economy.

The Retrofitting to be Future-Fit report with expert insights on how companies and those invested in the global real estate economy can successfully decarbonize their real estate will be discussed during the Retrofitting and Resilience webinar on Nov.10, 2022, at 3 pm GMT/9 am CT/10 am ET as part of COP27.

About JLL

JLL (NYSE: JLL) is a leading professional services firm that specializes in real estate and investment management. JLL shapes the future of real estate for a better world by using the most advanced technology to create rewarding opportunities, amazing spaces and sustainable real estate solutions for our clients, our people and our communities. JLL is a Fortune 500 company with annual revenue of $19.4 billion, operations in over 80 countries and a global workforce of more than 102,000 as of September 30, 2022. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit jll.com.

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Contact: Gayle Kantro
Phone: (312) 228-2795
Email: Gayle.Kantro@am.jll.com

 

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SOURCE JLL

FAQ

What is the significance of JLL's research on retrofitting buildings?

JLL's research emphasizes the need to triple retrofitting rates to 3% per year to meet 2050 decarbonization targets from the Paris Agreement.

How much investment is required in the office sector for retrofitting according to JLL?

JLL estimates that approximately $3 trillion will be required in the office sector to achieve decarbonization goals.

Why is retrofitting important in the context of the energy crisis?

Retrofitting buildings to be more energy efficient is essential to mitigate rising energy costs and improve overall building value.

What collaboration is necessary for effective retrofitting according to JLL?

Collaboration among landlords, tenants, suppliers, and local governments is crucial to transition to a low-carbon economy.