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Renovation is Key to Accelerate the Decarbonization of the Built Environment

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It’s been said many times, but the number is too stark to ignore: real estate is responsible for over 40% of global carbon emissions annually, resulting from building operations as well as embedded carbon from construction and materials. This percentage spotlights a huge responsibility for the sector to act and transform itself into a carbon neutral industry.  

Besides the obvious need to tackle the climate and environmental challenges, we currently see two main drivers of change for the industry which are regulatory and financial in nature. Indeed, we see increasing regulatory pressure from governments in Europe and the United States to optimize buildings stocks to become net zero carbon, punishing poor energy performance with rental bans, and rewarding green investments with financing options. Financial drivers are mainly felt with clear premiums on green assets and discounts on brown assets.  

These regulations leave little choice to corporate real estate owners and investors, but even so they still face another challenge. Building new structures with modern green standards represents only a tiny fraction of most portfolios while, according to the European Environment Agency, 90% of the existing buildings today will still be there in 2050. In most cases, demolishing and rebuilding produces emissions during the construction process, and this can represent up to 50% of a building’s lifetime emissions. Therefore, it is clear that renovation of existing assets is key to the industry’s path to net zero. But how can this be achieved? 

Thankfully, solutions from visionary entrepreneurs and companies are rising to the occasion. Berlin-based Ecoworks, a serial renovation startup betting on digitization and automated prefabrication to disrupt the traditional model, is one of them.  

Ecoworks was created in 2019, prompted by the fact that 3.4 million housing units in Germany are under threat of rental bans imposed by EU regulations within the next five years, combined with major challenges in the construction industry, specifically increasing costs, labor shortages, and the lack of innovation. The startup is currently focusing on multifamily residential assets in Germany with plans to expand to more asset types and countries by 2025. Ecoworks clients currently include Noratis, Gewobau Erlangen, and other major local players. 

Using deep construction tech, including proprietary planning and building software, automation, and prefabrication, Ecoworks is able to reduce the onsite renovation time from months to weeks and turn brown buildings into truly net zero carbon structures. One of the key advantages of this solution is that tenants can typically remain on the premises, which means no disruption to the life of the building and no interruption of the rental flow for the investor. Other incentives for investors include subsidies from the German government to help cover the renovation costs, a significant reduction in heating costs of up to 60%, as well as rental premiums and asset value premiums of up to 50% post renovation, according to recent estimates from Ecoworks.

In conclusion, it is reassuring to observe that sustainable options do exist to decarbonize the building stock at scale, and that business and financial interests can also be reconciled along the road to net zero carbon, looking at 2050 and beyond. This is essential to foster innovation and collaboration between the public sector, investors, tenants, and entrepreneurs to tackle the decarbonization of the built world. 

Written by Arnaud Bouzinac, growth principal

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