Retro is out, ESG is in: The Benefits of ‘Smart’ Real Estate.

‘At least 80% of todays’ buildings will be in place in 2050, the date at which the UK has legally binding target to reach net zero emissions.’ (Pinsent Masons)

Have you considered retrofitting to improve your ESG performance?

‘Out with the old and in with the new’, a saying we’ve all heard before. The very premise of the saying is that old items should be replaced immediately by something new, something fresh and something ‘better’. But in the context of real estate, legacy assets hold a different weight. Older buildings may be fit for purpose in terms of daily living requirements and are responsible for huge levels of embodied carbon that do not justify replacement, but in the context of ESG – new build developments are miles ahead when it comes to mitigating emissions, reducing energy consumption, and driving towards Net Zero Carbon goals.

Now, while we’re not in the game of promoting vintage or otherwise, we are in the game of increasing the value of assets in the name of ESG. Ultimately, whether your asset portfolio is standing assets or new builds, we believe in making sure those investments have long term benefits for those along the transaction path, and those communities they serve.

We’re also happy to say that traditional barriers to retrofit that made it expensive and arduous, are now not the only option available. Utopi as a solution is low cost and simple to install (with Multisensors being as quick as 5 minutes!), removing those barriers with minimal CapEx. So, all is not lost!

Ultimately, as Pinsent Masons state: ‘at least 80% of todays’ buildings will be in place in 2050, the date at which the UK has legally binding target to reach net zero emissions.’  Which begs the question, have you considered retrofitting to improve your ESG performance?

Technology and Real Estate.

Smart technology is developing more and more with every day, and while the likes of Chat GPT have some looming questions; the impact of Smart Technology on real estate have proven benefits. Whether it be helping engage residents and retain tenants by using technology to enhance their living experience, or whether it be helping enhance operational efficiency for managed assets, or even helping increase the bottom line; smart tech has solidified its place in property. After all, in 2023 we can simply ask Alexa to turn our lights off.

But what does this equation look like for retrofitting properties?

A key takeaway is when retrofitting for ESG standards it has a quick path to return on investment: “Retrofitting a building with sensors and software can be a complex process, which requires careful planning to ensure that the systems are installed correctly. Tech maturity has made retrofitting for energy efficiency more cost-efficient and less disruptive to occupants, with a quick return on investment through energy savings, making it a smart investment.”(Lexology)

In the context of Utopi’s smart IoT devices, the ESG data they collect and the diagnostic context to utility consumption data that they offer; can stimulate huge changes in energy usage, waste management, void management, and as a result – reduce costs and emissions by 20-30%. When you combine that with our Multisensors taking as little as 5 minutes to install, suddenly the arguments against retrofit and the barriers Asset Owners might face are solved.

But do the benefits go beyond ROI? We’ll break down the impact on Stakeholders.

Stakeholder impact.

1.     Investors, Asset Owners and Landlords.

Where the retrofit decision sits, and arguably the stakeholders with the most to lose if their real estate doesn’t fit net zero carbon criteria come 2050. The main impact at the top of the asset chain is cost, and whether taking an initial hit to profit is worth the long-term ROI: ‘As a long-term cost-effective process, stakeholders may see potential in smart technology retrofitting as it increases the building’s value, attracts new tenants, and enhances sustainability credentials.’ (Lexology)

What we do know however is, with the rising cost of living and inflation, the longer it takes to retrofit, the more expensive it will be: ‘Properties with poor environmental, social and governance (ESG) standards are likely to suffer what's known as a brown discount: as time goes on, the cost of retrofitting assets to meet green targets will increase to the point where those assets become financially stranded. As things stand, only 34% of UK businesses have smart tech installed in their buildings.’ (RICS)

2.    Operations and Facilities Management Teams.

Operations and facilities management teams can hugely benefit from smart technology, because it can optimise operations and drive operational efficiency through data analysis.

IoT devices and other smart technology can detect maintenance issues, can provide real-time data on occupancy, waste, energy consumption, air quality, humidity, and send alerts when outliers in the data occur like overly high temperatures or empty spaces. The data can as a result reduce costs, reduce emissions, enhance automations to drive efficiencies, and of course improve profitability.

Utopi customers have used this operational data to develop overheating mitigation strategies, establish optimised uses of amenity spaces and enable active management of utility consumption. Seeing in real time what impact certain enhancements or improvements have, makes it possible for owners and operators to test and rapidly iterate concepts. This includes ventilation, shading, insulation, and alternative heating / cooling options.

3.    Residents and Building Inhabitants.

With ESG being about building sustainable communities and the benefits to those communities, it will come as no surprise to hear that the quality of life in a retrofitted and strong ESG performing building vastly improves. Good air quality can help avoid pollutants and associated health conditions, and living at an optimum temperature of 20°C – 22°C (depending on the season) can improve mental and physical health, improve sleep, etc.

But this goes beyond just residential spaces, even productivity in a commercial space can improve with smart technology and ESG aligned performance: ‘Poor office lighting, for example, is known to increase the likelihood of headaches and fatigue; hardly an incentive to work. A study by the World Green Building Council shows that improved lighting conditions raise productivity by 23% and air quality by 11%.’ (RICS)

As we continue to move swiftly towards NZC deadlines, and as ESG strategies and best practise become more ingrained in the real estate sector, one thing is for sure - it is important for stakeholders throughout the asset chain to set realistic targets. Property can be retrofitted to reduce environmental impacts, to reduce energy consumption and overall costs; but it will always be a balance between upfront cost and long-term ROI.

Ultimately, ‘We need to work together to maximise these ESG credentials in a joined-up approach that focuses on sharing data and creating green leases and clauses that supports both the owners and occupiers. This will in turn create greater transparency, setting out commitments to act together that suits both the developer and occupier to create a more sustainable building and ensuring ESG targets are met.’ (Savills)

For advice on retrofitting with Utopi ESG technology, and how we can help you enhance ESG performance – speak to our expert team today.

Author, Chris Martin (BTR Lead, Utopi)