Sustainable Real Estate – ‘the greenest building is the one never built’

Sustainable Real Estate – ‘the greenest building is the one never built’

The saying, ‘the greenest building is the one never built’ might sound cynical but holds some truth. When looking at the life cycle analysis of a building, a lot of greenhouse gas (GHG) emissions come from construction and demolition phases, typically areas where data is missing. Given this, our approach to real estate sustainability is forward looking and flexible, intended to capture the broad range of life cycle issues and support the sustainability ambitions for our sustainable real estate strategies, and ultimately our clients.


In order to meet worldwide climate targets, we need to limit the construction of new buildings while re-using the existing built fabric as efficiently as possible. When we do this, the reduction is significant. The construction of a new office easily results in more than 1,000 KgCo2 per sqm emission, while a refurbishment would mitigate this by reducing the level of emissions to less than half this amount. The emissions locked in during construction have also become increasingly relevant as buildings become more efficient. Where GHG emissions from the construction phase were perhaps 20-25% in the past, it is now increasing to 45-50% or even 90% of total building life cycle GHG emissions in extreme cases 1).


EC Reduction potential at different stages of a building project


Source: Embodied Carbon Status Quo and Suggested Steps

In some cases - and despite population declines in many markets - new buildings are still required, for example in residential housing due to urbanisation. In such case, buildings would need to incorporate flexibility in (future) uses to increase longevity, while making sure the building can be easily disassembled and materials can be recycled at the end of the building’s life. The choice in building technique and materials used would however remain critical, as this would have a large impact on upfront GHG emissions.


An increased focus on a development’s upfront GHG footprint is further relevant given that there are only about 10 years left before the door closes for limiting global warming to less than 1.5C. As a result, there is a need over this period to limit the GHG emissions when building (or retrofitting) to create these near zero emission buildings for long term use.


Unsurprisingly, when we research the sustainability aspects of listed real estate companies, prominent factors we consider include a focus on retrofit, measurement of the impact of construction activities (scope 3 reporting), and focus and ability to mitigate GHG emissions during the construction process. These are however also some of the hardest factors to assess. The reported data, if any, still needs to be scrutinised on fine print. Which activities and assets are included and which are not? Also, companies who undertake well managed proactive retrofit activities rather than selling problem assets away might be unfairly punished in the numbers.


With data quality still lacking, we still value our thorough qualitative analysis where a large range of factors are weighed and assessed based on the type and circumstance of a company. These include numerous items including material, local sourcing, a focus on urban brown field, inclusion of green features, connection to public transport, recycling and water use during construction, etc. Our aim is to target best practice, even before complete and comparable data is available in all cases.


This all makes economic sense, too. We expect possible carbon taxes to impact material prices, an increased awareness on life cycle impact with authorities and users to impact regulation and demand and we expect lower depreciation rates on quality buildings. Above all, we expect companies that are leaders in all aspects of sustainable real estate will also prove to be the market leaders of tomorrow.


1 Embodied GHG emissions of buildings – The hidden challenge for effective climate change mitigation- Martin Rock et al., 2019


More about the authors

Boudewijn Schoon Senior Portfolio Manager

Boudewijn Schoon is a portfolio manager real estate, responsible for global listed real estate strategies.

Read next