November 16th 2023

The technology powering commercial real estate’s net-zero strategies

The technology powering commercial real estate’s net-zero strategies

The following article, written by award-winning independent journalist Tim Smedley, is an extract from a recent insight report ‘The role of technology in decarbonising commercial real estate’  published by Raconteur. You can read the report in full here.

Against a backdrop of recent climate disasters, from Brooklyn to Libya, the need to decarbonise the commercial real estate (CRE) sector is increasingly hard to ignore. Buildings are a major contributor to climate change, responsible for 23% of all UK carbon emissions, 30% of which come from non-domestic buildings. Yet, writes Professor Paul Ruyssevelt of University College London, “Despite the importance of the sector and the significance of its emissions, it has been little researched by comparison to the domestic building sector in the UK. What we do know is that little progress has been made in decarbonising."

The overarching goal is clear: achieve net zero carbon by 2050, as stipulated by the Paris Agreement and written into UK law. However, it’s easy to view 2050 as a distant horizon. “If we don't act to decarbonise our buildings now, we won’t achieve our climate goals,” warns Ben Pettitt, Sector Lead for Real Estate UK & Europe at IES. A key target year, he says, is 2030, when emissions need to be reduced by at least 43% by 2030 compared to 2019 levels to keep the climate within the 1.5°C limit. “That’s around six years away", says Pettitt. “We need continuous year-on-year emissions reductions from now on.”

The CRE sector has a long way to go on its decarbonisation journey, so it’s good to start with the low-hanging fruit and quick-wins. IES believes that every building can be decarbonised by gathering and analysing the data needed to improve design, retrofit and operation. “You need to understand where you are right now, and data is central to that,” says Pettitt. “When looking at the efficiency of buildings, how buildings are performing and the potential for buildings to decarbonise – data can give us the answers. But we need to consider the quality of that data and where it comes from.”

The power of digital twinning 

As the UCL research finds, many organisations possess only rudimentary data on their buildings, sometimes merely utility bills, which barely scratch the surface of a building’s environmental performance. This is where IES plays an integral role: by capturing, analysing and simulating data from a range of sources, it provides a foundational basis upon which informed decarbonisation strategies can be based.

Utilising IES’s industry-leading technology allows organisations to “digitise their buildings” – creating ‘digital twins’, or highly accurate digital replicas of buildings – to virtually test which measures will have the most profound impact. Pettitt explains that their technology uses a powerful physics-based simulation engine alongside the data to accurately predict “the carbon reduction and energy savings associated with hypothetical changes” and inform net zero investment and operational strategies.

Once you have the data, understanding how to act upon it is the next piece of the puzzle. Pettitt asserts that the first step in the energy hierarchy is “to reduce, and that's about driving operational efficiency and reducing consumption as far as you can”.

However, energy reductions need to be carefully balanced against occupant needs. To navigate this, IES’ technology offers the ability to optimise operational energy efficiency of buildings whilst maintaining and enhancing the comfort, health and wellbeing of occupants through managing lighting, air quality and thermal comfort levels. 

Data-based strategy

When it comes to the next stage of investing in building upgrades, heat pumps in many cases will be key to decarbonising the built environment, but currently their effectiveness is compromised “if the building fabric is really inefficient.” Therefore the underlying efficiency of the building, in terms of "its thermal performance" and "airtightness," must first be thoroughly evaluated and optimised. Only then should subsequent steps be taken to install low-carbon technologies like heat pumps, augmented by onsite renewables such as solar PV and battery storage. “When it comes to such strategies, building owners need the ability to make investment grade decisions using data and technology they can trust,” states Pettitt. “That’s exactly what we aim to provide.”

Only 31.6% of office buildings across the UK’s major cities currently have an Energy Performance Certificate (EPC) of C or higher. However, it’s crucial that asset owners look beyond their EPC to gain a true understanding of how energy efficient their buildings truly are, with even those rated at the higher end of the scale potentially performing far worse than their rating indicates. Pettitt points to a number of existing industry metrics, such as the UK's NABERS sustainability rating scheme for office buildings, as a more accurate way to benchmark building performance with operational data. The Science Based Targets Initiative (SBTi) and the Carbon Risk Real Estate Monitor (CRREM) Pathways also “help people plot their buildings’ decarbonisation plans against these industry-agreed trajectories to make sure that they are on track”, says Pettitt. 

In terms of the gold standard, “the UK Green Building Council have set targets for energy use intensity for office buildings of 70 kilowatt hours per metre squared per annum from 2030”, says Pettitt. “By way of comparison, the average new office building in the UK is 160 kilowatt hours per metre squared. So that gives you a flavour of what needs to be done.”

Act now to avoid future challenges

In the realm of CRE, taking action on emissions often boils down to a nuanced discussion between building owners and tenants. Pettitt argues for a collaborative model, whereby costs – and indeed, benefits – are shared in a manner that aligns with lease arrangements and acknowledges the roles and responsibilities of each party. “The tenant has a role to play in minimising the carbon footprint through responsible utilisation of the building, while the owner must be receptive to the tenant’s needs, investing in improvements and advocating for green operations”, he says. 

While the route toward mutual financial and environmental benefits may lack a one-size-fits-all solution, there's also a shared advantage. Both landlords and tenants alike can benefit by employing IES technology. “Where can we insulate the building? Is it the roof, the walls or the floor? Is changing the glazing of the window, or adding solar PV, right for this building?” asks Pettitt. “The only way you're going to really know accurate answers is via a deep data dive. Our digital twins incorporate live dashboards to provide a single pane view of performance across the building, offering actionable intelligence to guide both short-term operational optimisation strategies and longer term retrofit investments.”

Kicking the can down the road to 2050 is not a viable option, for business or government. “Buildings with low energy efficiency are exposed to both climate and financial risk. Climate risk can take the form of physical risks such as overheating, wildfires or flooding. While high demand on grid supplied electricity and fossil fuels also leaves buildings exposed to financial risks such as volatility in the energy markets and ability to secure preferential borrowing rates of green finance or insurance premiums," warns Pettitt.

Now, with 57% of the world’s listed companies now reporting climate risk in line with five or more topics recommended by the Taskforce on Climate-Related Financial Disclosures (TCFD), Pettitt concludes, “decarbonising and future-proofing buildings now simply makes business sense.”

For more information on how IES is supporting the drive to net-zero within the commercial real estate sector, visit:

Delve into more independent insights from some of the CRE industry’s foremost thought leaders in the Raconteur Insight report, The role of technology in decarbonising commercial real estate.