The circular reuse of materials in cities including London, Amsterdam and Paris, is advancing and helping to reduce the embodied carbon of office redevelopments, says Savills.
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.”
