"So far, the industry’s approach to retrofitting has been fundamentally flawed, swinging between two ineffective extremes: an expensive "all-in" strategy, which proposed every possible upgrade with a huge price tag, and a piecemeal, anecdotal approach"
- Puja Balachander - UpGreen
The UK's real estate industry is facing a monumental challenge. With 87% of commercial buildings and 25% of social housing properties required to meet minimum energy efficiency standards within the next five years, owners will need to act in the next 2-5 years to avoid asset write-downs, stranded value, and compliance penalties.
Historically, retrofitting was a box-ticking exercise, a costly and complicated compliance burden with little return. The pressure to meet stringent climate targets is huge, yet the economic reality of decarbonising our built environment often feels like a zero-sum game.
But what if we've been looking at it all wrong? What if retrofit isn't a drain on value, but a powerful engine for it? As we grapple with the urgent need for net-zero, a new paradigm is emerging that sees decarbonisation not as a cost centre but as a strategic asset.
So far, the industry’s approach to retrofitting has been fundamentally flawed, swinging between two ineffective extremes: an expensive "all-in" strategy, which proposed every possible upgrade with a huge price tag, and a piecemeal, anecdotal approach.
The latter might see a property owner installing new windows without a clear understanding of whether this was an impactful or cost-effective intervention for a single building or an entire portfolio. This lack of a unified, data-driven strategy made projects ineffective and impossible to scale.
This scattershot approach led to fragmented, inefficient, and expensive projects, making it impossible to apply lessons learned across an entire portfolio.
Making retrofits effective and scalable
For us, the key to this transformation is in leveraging data. By using data-driven insights, property professionals can optimise for the things that matter, namely valuation and compliance impact.
Instead of guessing, there are tools now which can pinpoint the projects that offer the highest return on investment, both in terms of energy savings and asset value uplift. For example, our analysis might reveal that for a specific office block, an owner might get the same valuation impact whether they spend £10K on heating controls and better insulation, or they spend £50K on a whole schedule of work.
Our AI-powered forecast provides these insights by modelling the ROI of more than 40 combinations of interventions for each property, and owners can dive into these scenarios too, so that they can make decisions aligned with existing asset planning.
Reimagining financing models
Accurate forecasting is a non-negotiable part of this new approach, as it directly addresses the financing problem. The inability to predict costs, energy savings, and valuation uplift with precision has made lenders unable to accurately price the risk for retrofit financing and forced property owners to shoulder the full burden of capital expenditure or take on expensive additional financing.
By providing lenders with reliable, data-backed project forecasts, we can enable them to structure retrofit loans at scale. These are not traditional loans; they are often tied to the operational savings, or they are property-linked and tied to the valuation impact on a property post-investment.
This approach aligns the interests of all stakeholders, landlords, lenders, and investors, in a shared vision of a decarbonised, profitable property portfolio.
From cost centre to commercial differentiator
Ultimately, this shift means the UK real estate market can finally reconcile its net-zero goals with its commercial imperatives. Retrofit is no longer just about meeting a mandate; it's about future-proofing assets, enhancing operational efficiency, and creating a more resilient and valuable portfolio.
Our market experience has shown us that we need to take a nuanced approach to retrofit strategy. For example, an office building in a prime location will likely command a green premium, and have higher occupancy with a lower carbon footprint. An industrial shed in a sub-prime location, on the other hand, won’t get much of a premium, unless it is out of compliance and its moved into compliance - going from unlettable to lettable.
These market insights are uncomfortable truths about decarbonisation in the built environment, but ones that need to be taken into consideration to move retrofitting from a “nice-to-have” cost-centre, to driving economic value.
The question is: will the UK real estate industry seize this opportunity to plan ahead and protect its assets?
