How to leverage technology to balance retrofitting and new build investments

By Gigi Zappel, CEO and Co-founder at IMMO

The UK faces a persistent housing crisis, characterised not just by a shortage of homes but also by the urgent need for sustainable housing solutions that meet modern environmental standards. Amidst this crisis, retrofitting emerges as a strategic approach that offers a balance between enhancing the quality of housing and reducing environmental impact, particularly focusing on both embodied and operational carbon emissions.

Retrofitting, the process of updating existing buildings with modern features and technologies, presents a viable alternative to new construction by leveraging existing infrastructures. This approach addresses immediate housing needs and aligns with the UK's ambitious climate targets by significantly lowering carbon footprints in residential spaces that were built without environmental considerations.

Here’s why retrofitting is an essential strategy for today's real estate market, and how technological advancements are making retrofitting a more feasible and effective solution for sustainable living.

The importance of carbon efficiency in housing

Addressing carbon emissions in the housing sector is pivotal for the UK's efforts to combat climate change and achieve its environmental targets, such as minimising waste to achieve zero avoidable waste and maximising the value and benefits we get from our resources, doubling resource productivity by 2050. Therefore, understanding the distinction between embodied and operational carbon is crucial.

Embodied carbon refers to the carbon dioxide emitted during the manufacture, transport, and construction of building materials, together with the end-of-life emissions. This type of carbon is particularly significant in new built projects where new materials and extensive construction processes are involved. On the other hand, operational carbon accounts for the carbon dioxide emissions during the operational phase of a building, primarily from heating, cooling, and power consumption. Reducing operational carbon is traditionally focused on through energy efficiency measures in the building's design and use.

While new builds can incorporate cutting-edge designs for energy efficiency, they often involve high levels of embodied carbon to deliver. Conversely, retrofitting allows for the reduction of operational carbon by upgrading existing structures with energy-efficient systems and materials, without incurring the high embodied carbon costs of new construction.

Retrofitting as a sustainable response to the housing crisis and challenges with new builds

By improving insulation, installing energy-efficient systems, and utilising sustainable materials, retrofitting can transform an older building into a more energy-efficient home. This significantly reduces the operational carbon by lowering the energy required for heating and cooling.

While new constructions can be designed with modern sustainability standards, the production of construction materials such as concrete, steel, and glass involves high levels of carbon emissions. Moreover, the rate at which new homes are currently being built does not meet the growing demand, compounded by issues like high land prices, planning complexities, and increased construction costs. 

Indeed, the scale of this shortfall became evident in Q4 2023 when only 212,570 new homes were completed across the UK—falling significantly short of the government's annual target of 300,000 units, and well below the estimated demand for 500,000 units. These challenges make retrofitting an even more appealing option, as it allows for the quick adaptation of existing properties to meet housing needs without the lengthy delays and high costs associated with new developments.

Technological innovations in retrofitting

In the rapidly evolving field of residential real estate, IMMO harnesses PropTech solutions to ensure retrofitting projects are not only environmentally sustainable but also economically viable. Here’s how technology is making a difference:

IMMO's predictive modelling harnesses advanced data analytics to assess properties for retrofit potential. This modelling considers many factors such as property age, historical energy usage, and anticipated energy savings, prioritising projects that promise significant improvements in energy efficiency and carbon reduction.

The technology delves deep into local supply-demand dynamics by analysing variables including commute times, rental growth rates, and local amenities. This granular insight allows IMMO to target investments in areas poised for growth, ensuring that retrofitting efforts align with regions displaying the strongest tenant demand and stability. Moreover, the inclusion of neighbourhood features like green spaces and school quality further refines investment decisions, enhancing residential desirability and performance.

IMMO's AI-driven systems extend this capability by forecasting the outcomes of retrofitting measures, such as energy savings and potential property value increases. Automated tools generate detailed energy models of properties, simulating various retrofit scenarios to optimise energy efficiency with minimal investment. 

Embracing a future in retrofitting

Retrofitting represents a strategic response to the dual challenges of housing shortages and environmental sustainability. IMMO's tech-driven approach exemplifies how retrofitting can significantly reduce both embodied and operational carbon, demonstrating a commitment to responsible investing. By leveraging advanced data analytics and AI, IMMO not only enhances energy efficiency but also boosts investment value, showing that environmental sustainability and economic gains can go hand in hand.

For institutional investors, embracing retrofitting means not just achieving financial returns but also contributing positively to communities and environmental goals. This blend of profitability and responsibility highlights the transformative potential of smart, sustainable investment strategies in today’s housing sector. If you’d like to find out more on how IMMO can help you on your journey, check out the website.