Low-carbon Renovation

The real estate sector is not only facing significant challenges but also presenting interesting opportunities. During a market slowdown, low-carbon renovation emerges as a promising avenue for development.

Currently, the majority of institutional investors are shifting their focus towards achieving Net Zero Emissions and closely monitoring their real estate portfolios through the Carbon Risk Real Estate Monitor (CRREM). “The past 12 months have seen Environmental, Social, and Governance (ESG) considerations become crucial factors in investment decision-making” explains Vincent Van Brée, Head of capital Markets Luxembourg.  Best rates in BREEAM, DNGB, LEED, and others certifications have become essential markers of sustainability but are not sufficient anymore. The most sought-after and liquid opportunities are those where investors possess a clear roadmap towards achieving Net Zero Carbon, even if it means a gradual implementation.

Additionally, the commitments made in the Paris Agreement require triple the pace of low-carbon renovations by 2030. However, in Luxembourg, only 0.12% of the real estate portfolio undergoes renovation each year, significantly lagging behind the European average of 1%. This calls for urgent measures to bridge this gap.

Investors who are proactive in taking action can take great benefits, including increased rental income, reduced financial risk, favorable access to capital, and enhanced tenant loyalty.

“Yet, despite these advantages, some investors remain hesitant in formulating and executing a renovation strategy. However, delaying action can be risky, particularly considering the recent surge in construction costs, which have risen by 34% since 2020.” Explains Mélanie Leblanc Senior Project Manager, Work Dynamics

Prior to embarking on carbon neutral renovation, undertaking an audit of the existing condition is crucial to set achievable goals. Various renovation approaches are possible, ranging from comprehensive building renovations to upgrading technical equipment or optimizing performance through lightweight renovations. Beyond regulatory requirements, energy-efficient renovations enable assets to differentiate themselves in the rental market, improving their overall positioning. “By meeting tenant expectations, landlords enhance the value proposition for occupants while creating an exceptional user experience” adds Mélanie Leblanc Senior Project Manager, Work Dynamics.

For tenants, sustainable renovations offer cost savings on real estate expenses, bolster the brand image of companies, and promote talent retention. Therefore, sustainable renovations represent an unparalleled opportunity for the real estate sector. They align with the requirements of the Paris Agreement, generate sustainable and responsible value, and provide environmentally-friendly workspaces. Market players must seize this opportunity by making informed decisions and seeking guidance from domain experts. Low-carbon renovation is not only an ecological necessity but also a competitive advantage for those who embrace it promptly.

The benefits of low-carbon renovation go beyond financial gains. By adopting sustainable practices and creating greener spaces, real estate professionals contribute to the larger cause of combating climate change. They become catalysts for positive change, helping to reduce greenhouse gas emissions and create a more sustainable future. Additionally, investing in low-carbon renovation showcases a company's commitment to corporate social responsibility and sustainability, which can enhance its reputation and attract socially conscious stakeholders.

In conclusion, sustainable renovation presents an unmissable opportunity for the real estate sector. It aligns with global sustainability goals, offers financial advantages, and creates value for both landlords and tenants. By taking proactive steps towards adopting low-carbon practices, the real estate industry can play a crucial role in mitigating climate change while reaping the benefits of long-term financial stability. It is imperative for market players to act now and seize this opportunity for sustainable and responsible growth.