Can real estate keep pace with cities’ net zero plans?
From our “Sustainability” Thought Leader Partner, JLL.
This article was originally published on JLL’s UK website.
Though market forces are driving decarbonisation efforts in real estate, government regulations, education and incentives are also key influences
In many cities across the world, 2030 will be a key year in their sustainability journey.
From Paris to Los Angeles to Tokyo, it’s the year when all new buildings need to be net zero carbon.
And this is just the start. Progressive cities are also setting longer-term goals for all buildings to be net zero by 2050.
It’s a tall order; with 60 percent of carbon emissions in urban centres coming from buildings, achieving these targets will take funding, education, and a solid roadmap for getting there. But it’s far from impossible.
Today, cities are at different points in their decarbonization journey. While trailblazing cities such as Copenhagen and Amsterdam have already implemented innovative initiatives around energy and city planning, others like Shanghai and Dubai have recently released their first climate targets. Meanwhile, climate-aware cities such as Hong Kong, Seoul and Manchester have aspirational climate plans but lack joined-up specifics, according to JLL’s Decarbonizing Cities report.
“While all these cities are putting out quite bold commitments, governments cannot meet these commitments without a very proactive program to decarbonize the built environment,” says Jeremy Kelly, Lead Director, Global Cities Research at JLL.
Global cities such as New York City, Singapore and London are among those that have less experience in climate action yet have mapped comprehensive pathways to achieve net zero targets.
“These cities, which have a very large building stock, are leading on decarbonization initiatives and often managing just as robustly as the trailblazing cities,” says Kelly.
Retrofit challenges
Nearly all existing buildings will require retrofitting to ensure they become carbon neutral by 2050.
“Meeting net zero carbon targets means taking building performance into account, as well as making clean energy infrastructure like renewables and transportation, and technologies such as thermal storage, batteries and fuel cells part of building management strategy,” says Greg Bolino, Head of Global Sustainability Strategy & Assets at JLL. “These are significant investments that will need to be organized over the investment horizon.”
Retrofit works include improving energy efficiency across lighting systems, and heating, ventilation and air conditioning. In years to come, buildings will need on-site renewable energy and support for electrified transport.
Some large property owners are making headway on decarbonizing their buildings in response to demand from commercial tenants with their own net zero targets to meet. At the same time, investors increasingly value those buildings with have a clear roadmap for reducing emissions.
“We’re seeing substantial market forces driving real estate owners in every market to decarbonize their assets to meet the demands of corporate occupiers. This is usually outstripping regulatory change,” says Bolino.
However, with small and medium-sized owners accounting for the majority of building stock, many property landlords and investors lack the resources and experience to embark on these upgrades. And in cities that lack robust regulations to point the way forward, many owners simply don’t know what to focus on.
“Every building needs to be on a pathway for retrofitting and any owner’s portfolio will need to be supported by an investment plan,” says Bolino. “In the U.S., the majority of owners do not have that roadmap.”
More government support at a local and national level can drive momentum through tax incentives, funding models, and accelerators that can spur building and materials innovation.
“Governments have a critical role in providing education, particularly for the small and medium-sized owners who often own lower-grade stock. We’ve got to bring that group into the journey,” says Kelly.
What’s more, it’s in cities’ best interests to act sooner rather than later and ensure landlords can invest in improving their real estate.
“Without enough superior building stock, cities can see investors exit,” says Bolino. “But when they provide funding, tax incentives and education support, it amplifies the impact of market forces and pushes cities further along in the decarbonization journey.”
Net zero neighbourhoods
As more cities lay out strategies for a net zero future, they’re increasingly examining the impact of full building lifecycles in city planning. Adopting circular economy principles to reuse and recycle materials and tackling embodied carbon – carbon dioxide emitted during the manufacture, transport and construction of building materials are key elements.
In Amsterdam, construction for an entire neighbourhood built from wood is due to start in 2025, reducing the embodied carbon in forged materials such as steel, while Oslo is funding a pilot zero-emissions construction site.
In France, regulation will limit embodied carbon across real estate lifecycles, encouraging more versatile buildings that can be adapted for new uses without the carbon-intensive processes of demolition and reconstruction.
Increasingly, the decarbonization of real estate is part of a broader strategy for cities to be more sustainable, providing a better quality of life for today’s communities and for generations to come while reducing the risks posed by climate change.
“Cities are not just looking at decarbonization in isolation, but in terms of social impact and factors such as resilience and biodiversity,” says Kelly.
“It’s long-term, holistic thinking that goes beyond 2030 or even 2050 – and real estate is a critical part of it. Cities are only going to create the type of future they’re envisaging if they can bridge the gap between intent and action. This is a vital decade for action.”