Achieving a net-zero commercial real estate sector – it all starts with the data

Most sectors are now agreed on the urgency with which we need to decarbonise, and the commercial real estate (CRE) sector is certainly no exception to this. According to Deloitte’s 2023 Commercial Real Estate Outlook, approximately two-thirds of executives stated that their companies are very concerned about climate change, with 79% believing that the world is at a tipping point, getting ready to act.

Of course, the emergence of increasingly stringent regulations, disclosure frameworks and transition pathways are also accelerating action towards net-zero within the sector. With ESG-mandated assets projected to make up more than half of all professionally managed assets globally by 2024 – representing an estimated US$80 trillion in value – those that fail to take action to ramp up their green credentials run the risk of their assets being left behind.

Prioritising the energy efficiency and carbon performance of real estate assets makes good business sense on many fronts. According to JLL, 74% of organisations are prepared to pay a premium for leasing a building with leading sustainability or green credentials, while 36% state that exiting less carbon-efficient space is becoming a particular focus for their organisation. This corresponds with the findings of CBRE’s latest Sustainability Index, which found that more energy-efficient assets had better investment performance over the last 12 months, with demand for good quality, energy efficient offices in particular being driven by tenants striving to meet their own corporate net-zero targets.

The WorldGBC highlights a whole host of reasons why businesses can’t afford to not be investing in sustainable buildings, with improved productivity and wellbeing, lower operating costs, environmental and financial risk mitigation, higher asset values and better access to finance for future green building investments amongst just a handful of the many benefits to be expected. However, while there is now an overarching consensus on the need to accelerate action towards net-zero – and, for the most part, the benefits of doing so are now well recognised by both building owners and tenants alike – many organisations still don’t know exactly what form that action should take when it comes to their own buildings.

Getting a handle on your data is key

The problem when it comes to decarbonising buildings is that no two properties are ever exactly the same, meaning a broad-brush approach simply won’t work. Asset owners and tenants need to get a clear handle on the unique performance of their own building (or buildings, in the case of a portfolio), taking consideration of a variety of factors that encompass everything from how and when the building is used, what materials have been used to construct it, where it is located, future weather predictions, where its energy is sourced, and so on. This is why having access to as much data about your building as possible – and knowing the source of that data is reliable – needs to be the crucial first step in formulating a robust net-zero strategy that you can be confident will deliver on the outcomes set.

While the majority of businesses are now poised to take action when it comes to complying with decarbonisation regulations, many that responded to Deloitte’s CRE outlook survey felt that they currently lack the data or capabilities to comply. In fact, only 7% of organisations surveyed reported to currently use ESG data and analytics in their investment strategy decisions, though encouragingly most who identified the risks of non-compliance and opportunities for full adoption say they plan to do so within three years.

Similar findings were echoed in JLL’s Future of Work Survey, with only 13% of businesses stating that they are collecting data on an ongoing or real-time basis and leveraging advanced forms of analysis. This compares to 59% that say they either do not regularly capture/report real estate data or that they do so only intermittently, while 28% consider themselves to be advancing their capability, with the systems in place to regularly capture and report data.

At IES, we’ve spent almost three decades delivering building performance analytics technology that can help to inform better design, retrofit and operational strategies for any building across its lifecycle. With our digital twin technology, we help to capture, analyse and simulate data from a range of sources, to create a highly accurate digital replica of your building or portfolio, so you can virtually test which measures will have the most profound impact prior to implementation in the real world. Using our proprietary physics-based simulation engine, we can accurately predict the carbon reduction and energy savings that can be achieved through prospective net zero investment and operational strategies, to better inform the optimum decarbonisation pathways at an individual building or portfolio level.

The role of technology in decarbonising commercial real estate

IES recently teamed up with Raconteur to deliver an insight report which takes a deep dive into the key role that technology must play in the race to decarbonise the commercial real estate sector by 2050. Featuring insight from some of the CRE industry’s foremost thought leaders, the report considers some of the key challenges and pain points faced by the sector in delivering effective decarbonisation of individual assets and entire portfolios. Outlining 7 key steps that can be taken to decarbonise the whole-life performance of buildings, it explores the opportunities that technology and trusted data presents to accelerate the net-zero transition and formulate clear strategies to mitigate climate and financial risks. You can read the report in full here.

For those looking to learn more about the opportunities that digital twins specifically can offer to support net-zero investment planning within the CRE space, our recent webinar, ‘Intelligent Net-Zero Carbon Investment Planning for Buildings and Portfolios’ hosted in partnership with global construction consultancy, Soben, is now also available to watch on-demand here.