Retrofitting older office assets to make them more sustainable is “economically and environmentally superior to redevelopment” according to an in-depth new report into the financials behind real estate’s drive to be more green.

Rather than knocking an older building down and developing a new one, office owners should improve buildings' energy performance, Green Street said in the report, More Green Than Red.

Retrofitting an older building produces less than half the carbon emissions of a redevelopment, Green Street said, citing data from GRESB, European listed property company disclosure, and its own research.

What's more, a good retrofit can double the rent on a building, it said, citing examples from the portfolio of Derwent London, with tenants increasingly unwilling to pay high headline rents for buildings that don’t meet strict sustainability criteria. The yield on cost from a retrofit can equal or even exceed that of a redevelopment.

Of course, every building is unique, Green Street pointed out, and some can't be retrofitted to the environmental standard that tenants require. Others are in poor locations or configured in ways that won’t allow them to be adapted for modern ways of working.

In that sense, working out which buildings are likely to be “stranded," or essentially un-lettable in a world of higher regulatory and tenant requirements, will be a key task for owners in the coming decade. Selling such buildings now, before the market starts to hugely downgrade their value, could be a wise strategy.

Green Street pointed out that although residential assets produce more emissions than offices, offices are likely to face more scrutiny from governments and regulators. That is because it would be politically unpopular to penalise voters for their carbon emissions and the fact office buildings are individually large and carbon-intensive.

Green Street argued that carbon taxes on office owners were very likely in future, as countries implement strategies to hit the net-zero carbon targets they have set.