Buildings are responsible for 37% of global emissions, and for up to 70% of emissions in cities, thanks in part to the production and use of high-carbon materials such as cement, steel and aluminium.

At the same time, four-fifths of the buildings that will be standing in 2050 have already been built, so without tackling the emissions from existing buildings, we cannot decarbonise our cities, or the wider global economy. “When we talk about the decarbonisation agenda, we can’t get away from a real emphasis on retrofit,” points out Paul Stepan, head of sustainability consulting at real estate company JLL.

The problem is that repurposing existing buildings is not what the construction industry is set up to do. “One of the key challenges is that historically, it has been easier to knock down and rebuild,” says Luke Graham, head of research at property tech venture capital firm Pi Labs. “It’s quicker, generally cheaper, and less restrictive, so there’s an economic incentive to knock things down.”

However, that is starting to change as governments and regulators bring in stricter rules, such as the European Union’s beefed-up Energy Performance of Buildings Directive, opens new tab and the UK’s Net Zero Carbon Building Standard, opens new tab, which is due to be released this year. “Regulation is ratcheting up the bar when it comes to building performance,” Stepan points out. “There is a massive undersupply of buildings and we’re seeing a flight to quality. There’s quite a clear commercial case for doing more retrofit.”

In addition, a growing number of companies are looking at the impact of their offices and operations as part of efforts to reduce emissions in their value chains. “Not being Paris-aligned is a massive red flag for investors and tenants but from 2025, half of the world’s real estate starts to become stranded assets” says Stepan.

For the sector to be aligned with the targets of the Paris Agreement, it needs to be retrofitting 3% of buildings every year, opens new tab, the World Economic Forum points out: at the moment, just 1% of buildings are being improved, he adds. Recent research, opens new tab for the Global Retrofit Index finds that reductions in greenhouse gas emissions from buildings are stalling in key EU countries, plateauing in the UK and reversing in the United States. Despite some progress, under the current expected trajectory, none of the countries assessed will meet their net zero climate commitments.

Retrofit faces a number of significant challenges. Unlike new builds, where the potential for a certain amount of uniformity in construction methods and design enables economies of scale, in retrofit “every project is different, physically, organisationally and contractually,” says Mel Allwood, sustainability director at engineering consultancy Arup. “You have to start again every single time.”

The requirements and opportunities of retrofitting differ depending on the type of building. Warehouses with large roofs have a significant opportunity to deploy onsite photovoltaic panels, for instance, while city centre office buildings do not. However, their proximity to other buildings and infrastructure may provide opportunities to, for example, procure heat from nearby sources of waste heat, such as data centres, or tap into a district heat network.

Activity has been hampered by the recent rise in interest rates and inflation, which has slowed private investment, as well as a shortage of workers and the relevant skills. Often, there is a lack of the data required to assess the current performance of a building and its facilities. Also, “the commission of systems is frequently rushed at the end of a building project, with the metering not set up well,” she adds. “In theory, building management systems should be able to give us lots of information but they are generally not set up to do that. Facilities management teams are not incentivised to target performance.”

However, as new regulations start to bite and occupier demand for greener buildings increases, there will be greater impetus to overcome such barriers.

France’s RE2020 law, for example, is aimed at improving buildings’ environmental performance throughout their lifecycle, from procurement of raw materials to construction, use and even end-of-life. The law came into force in 2022 and its requirements become progressively stricter every three years.

“It has really put the spotlight on new build versus retrofitting,” Stepan says. “Developers and asset managers are starting to ask: ‘do we really need to build from new?’” The law takes a whole-lifecycle approach to properties, something that the City of London is also looking at introducing. In Hamburg, developer Landmarken has built Germany’s first residential building where more than 50% of the materials have been chosen with reuse in mind.

New tools and strategies are emerging to meet the growing demand for retrofit. EDGE is an international green building certification scheme , opens new tabdeveloped by International Finance Corporation, the commercial arm of the World Bank, and it has developed a software tool that allows developers to assess whether a project design meets the standards required to gain certification.

It also funds financial institutions so they can provide concessionary financing for green buildings, says IFC's Lenore Cairncross, green building lead for Africa. Some measures are relatively simple, she says, such as using reflective paint on roofs or outside walls, or putting tinted film on windows to reduce passive heating. Water-saving technologies are another important focus. Certification is important, she adds, because it gives investors who want to fund green buildings certainty that their investments are, in fact, green.

There is huge potential for more circularity in retrofits. Stepan at JLL says that 90-95% of building materials in use today can be recycled or reused, though currently only about 25% are finding a second use. Arup, in conjunction with the Ellen MacArthur Foundation, has developed the Circular Buildings Toolkit (CBT), opens new tab, “to help designers, construction clients and asset owners to understand how to adopt this vastly more sustainable way of producing the built environment”.

The first step is to understand what you have, what can be left alone and what can be reused, on site or elsewhere, says Allwood. “Where can I do nothing? And if I have to do something, how can I do it in the most effective way, minimising waste as much as possible. The more information you have at the start, the easier it is to set the right pathway.”

There is a growing recognition that “secondhand doesn’t mean second-rate,” she adds. “We’re starting to see the emergence of marketplaces for circular materials, and systems to store them, and provide warranties for them.

“We’re beginning to tag things as they go in so that the next generation won’t have to ponder what buildings are made of. They will be able to treat buildings as material banks and mine them for the things they need. But to do that, you need to know what’s there and what has happened to it.”

New digital tools will play a key role here, with existing tools such as building management systems (BMS) being enhanced by the power of artificial intelligence. ABB, one of the largest suppliers of buildings services equipment, recently invested in Brainbox AI, a startup that will help it to optimise its smart buildings technology.

Fabio Mercurio, head of strategy, sustainability and portfolio management at ABB Smart Buildings, says AI can make a big difference in energy use. “By connecting our software to existing BMS, or installing smart thermostats, our algorithms can start learning the behaviour of the building, and adjusting to external data such as the weather conditions.”

A new report from Pi Labs suggests that four AI use cases could save the equivalent of the U.S.’s carbon footprint if adopted industry-wide. Those use cases are:

Generative design For example, researchers have deployed 3D printing to reduce construction material inputs by 70%.

Construction rework Between 2% and 30% of construction expenditure is wasted through “rework”. Companies such as Contilio use LiDAR and 3D AI to identify defective work early and prevent rework on construction sites, reducing usage of construction materials.

Building energy waste Heating and cooling systems running concurrently occurs regularly in commercial buildings. AI-enabled tech startups such as Demand Logic have successfully deployed data analytics to reduce energy waste in buildings.

Demolition waste Waste-sorting remains manual and inefficient in many markets. Computer vision technologies such as Sorted.io are improving the economics of waste sorting, which can lead to millions of tonnes of construction and demolition waste being redirected annually.

The coming increase in retrofit – and the greater use of technology to enable it – also brings with it some new risks, says Paul Walker, chief revenue officer at UK-based smart building architects Juberi. “Smart buildings are all about data and while this can bring massive improvements in performance, it is also becoming the biggest risk from a cyber perspective. In a lot of new buildings, there is no real understanding of the risks associated with the huge amount of data that is being generated.

“There is no standard for managing data securely in smart buildings,” he adds. “There is not even a standard definition of what a smart building is.”

An increasing emphasis on retrofit seems inevitable, however. “More than 80% of today’s buildings will still be with us in 2050,” says Yetunde Abdu, head of climate action at the UK Green Building Council. “The importance of retrofit to help us meet our climate targets cannot be overstated.

“For it to be effective, you need a clear retrofit strategy and a recognition that it may not all happen at once. You need to think about a phased approach, linked to lease and maintenance cycles.”