While few might argue about the desirability of making the UK’s real estate assets more sustainable, the journey to achieve ambitious net-zero targets is far less clear.

Existing stock continues to dominate the market, and investors and developers need to determine how best to address new build versus refurbishment, and get their corporate and residential customers on board to collaborate not just on design, but on building use.

Bisnow’s half-day Building for a Sustainable Future event, held at Fraser Property's The Rowe in London, looked at a number of these challenges, particularly around whether it is better to retain the infrastructure of existing stock or knock it down and start again.

A number of the expert speakers stressed that the key was to target the whole building life, not just what happens during the leasing process.

“We are running green leases and have made a lot of progress, but a lot of engagement needs to happen during construction and handover and operation," British Land Head of Environmental Sustainability Matt Webster said.

"Then occupants need to be able to report back real-time data. We also need to avoid repeating a fit-out every five years but instead be thinking about flexibility and materials reuse."

He said that British Land has focused on opportunities for reuse against new build and said some of its newer buildings make use of existing structures where possible.

“We are running waterfalls of opportunities to reduce carbon," Webster said. "Right now it’s about transition technology, and looking further out, we are investing in a climate fund for longer-term for innovation. My advice is, be brave to pilot and trial it."

Tishman Speyer Senior Director and Head of ESG Europe Andres Guzman said that the recent rise in energy prices, while a challenge for society, had the capacity to hasten the onset of more energy-efficient building use.

"Right now, with the hike in energy prices, it’s a much easier conversation to have with tenants," he said. "So it’s not going to be a case of building something shiny and forgetting about it. If we acquire now, we have tools for not just now but 10 years, looking at performance ahead.”

Gardiner & Theobald sustainability consultant Richard Francis said that he believed the market would move quickly, citing innovations in France and the situation in cities such as New York and Tokyo where the landlord is responsible for reporting energy use publicly. Landlords are going to be on the hook at some point.

“Individual units [are] always going to be difficult, but just look at student housing where universities are taking ownership about having lower carbon emissions,” he said of how change is coming through.

Quintain Head of Sustainability Clare Masters stressed that adaptation should be not in terms of the cost of implementing sustainability but the cost of not doing so and questioning whether a new asset will be suitable to refinance, or have tenants who want to live in the space.

“As a build-to-rent operator, operational carbon has become a real issue for us, and we are working with our residents in how they make better choices,” Masters said. "The cost of energy is now a big driver for this."

Key to change is to tap into positive sentiment, not just as landlords but to leverage large institutional tenants who will have their own sustainability targets and may welcome the chance to collaborate, Fiera Real Estate Associate Director Frankie Demetriades said.

“When it comes to assets like industrial, that could mean significant capex, which, let’s be frank, tenants don’t want to cover,” Demetriades said. "But if, as a landlord, you will pay but that’s in line with a lease extension, then it’s more of a partnership approach."

Aldermore Commercial Director John Carter also highlighted the risk of a “building becoming stranded” and questioned how these might be invested in over the longer term.

“Users are looking for properties that meet certain credentials,” he said. "Doing nothing is not an option. So when we look at investing, we ask whether the asset [is] under the right ownership with a viable plan and capex.

“The conversation is becoming easier, as tenants need to demonstrate they are meeting their corporate targets.”

In terms of the residential sector, while LGIM’s Shuen Chan said that everyone wants to live in a more sustainable building, the main challenge is retrofitting existing stock.

“From a development perspective, we are putting in the highest standards we can from the design stage," Chan said. "When it comes to the existing stock, we are very much focusing on the operational carbon, plus refurbishments, which take into account embedded carbon and transportation."

For all new acquisitions, LGIM has to undertake a net-zero carbon assessment that gives it a view of the plans and what interventions need to take place to get that asset on the curve to net-zero carbon. That is then put into the acquisition plan, Chan said.

Native Land Managing Director, Investments Finn Carew said that the sustainability balance between refurbishment of existing stock and new development was not straightforward and said he believed a lot of obsolete stock is going to be difficult to retrofit.

“There are many where you will never be able to meet the operational efficiency of a new building, and so it’s not always the case that a retrofit will be more efficient over the lifetime," he said. "Each opportunity and asset needs to be looked at carefully."