Commercial real estate plays a key role in the UK economy, providing workplaces for businesses of all types and a range of investable assets for private and institutional investors. The sector is incredibly diverse, supporting industries including manufacturing, hospitality and retail, for example. With a range of different ownership models and with over half of the UK’s 1.8 million plus non-residential properties built before 1985, and in many cases decades if not centuries earlier, the sector faces numerous challenges as it aims to meet the Government’s 2050 Net Zero target. Buildings are a major contributor to climate change and in the UK, they are responsible for 23 per cent of all carbon emissions – with 30 per cent of these emissions coming from non-domestic buildings. Commercial real estate is a key source of C02 emissions, both in terms of the construction of new buildings and the energy demand from existing buildings, which means that the sector must respond to these challenges.
In a new report produced by UCL’s Institute for Sustainable Resources, in collaboration with HSBC, these challenges and the different approaches to decarbonising UK commercial real estate are explored in more detail. The report considers the need to combine reducing GHG emissions across the sector, with maintaining productivity and profitability. The Net Zero objective is now featuring as a key component of Environmental and Social Governance (ESG) in the commercial real estate sector. Many large occupiers are themselves setting clear targets for Net Zero and are beginning to engage with their landlords to work collaboratively. The report looks at where the opportunities lie and how organisations can navigate the demands of regulators and other stakeholders, whilst taking a candid look at the very real barriers that businesses face as they strive to pursue a path to Net Zero.
Through a combination of desk research and insights from organisations operating in the sector, the report reviews how businesses are approaching the need to achieve net zero and explores what next steps are required to ensure a just transition. It concludes with a look to the future and practical guidance for those embarking on their own net zero journeys.