The real estate industry has been facing increasing pressure to retrofit rather than demolish older building stock. Doing what's best for the planet is far from simple and straightforward, but it can be profitable when done right.

The sector is navigating a complex landscape of regulation, materiality and technical optimisation, panelists told the audience at Bisnow's UK ESG Conference, held at The Law Society Hall in London.

Developers need to do intensive groundwork to establish viability, whether upgrading old offices or converting assets to residential, but also be ready to accept when a building can be brought up to Grade A standards and when it can't.

“Refurbishment is almost always the first step, but you can get to the point where you’re torturing a building,” Stanhope Senior Development Director Helena Morris said.

Morris said that if a developer can get retrofitting right, the new occupants should feel the same in the final product as in a new build, without compromise.

Early surveys and meticulous due diligence are critical to a successful retrofit, and if executed well, refurbishment allows faster capital recycling while maintaining rental value for the developer and investor.

“That works for investment, rent and sustainability,” she said. “The reason we develop is simple: The product has to be right, and someone has to want to occupy it."

Morris said it is important to get the fundamentals correct, focusing on the building’s “guts,” including the building grid, structural integrity and floor-to-ceiling heights, especially when working with older assets.

Morris also raised the materiality challenge — how to ensure the right building products were chosen and also reused if possible, citing the issues around legal compliance and warranties.

“Our hardest job is asking ourselves if we’re spending the right amount on carbon and using existing materials to reuse carbon,” she said. “In 10, 20, 30 years, we want to ensure we haven’t left anything on the table.”

Investors, meanwhile, continue to balance ambition with caution, and Hub Managing Director Damien Sharkey said that although due diligence on older assets could take three times longer than for a new-build project, the payoff for that patience can be substantial.

The company retrofits commercial assets into new residential schemes in city centres, including coliving and PBSA assets. Its joint venture partners include private equity firm H.I.G. Capital and impact investor Bridges Fund Management.

“We set off with an ambition that isn’t compromised in any way,” Sharkey said of considering existing assets. “We’ve seen stranded assets that were perfect for living but not for offices, so we were able to get the entry price right and deliver homes in places we wouldn’t have done otherwise. It also has a great social impact.”

Sharkey highlighted long-term planning.

“When we’re designing, it can be seven years until someone moves in,” he said. “You need to look at replacement timescales and the carbon cost of what you’re doing now.”

He also cited a Hub project in Edinburgh where two at-risk listed buildings were retained within a multibuilding retrofit and restoration project and integrated with new construction, resulting in a space that combined heritage and modern efficiency.

From the contractor's perspective, Oktra Head of Sustainability and Environmental Jamie Firman said it is important to responsibly retrofit and engage early.

“Understanding client ESG drivers and the performance of the building allows us to identify the levers we can pull,” Firman said, adding that the increasing focus on embodied carbon, circularity and building use all have implications for design, materials and life cycle performance.

Technology and optimisation are important in reducing embodied carbon, and Symphony Energy CEO Tom Ascough described deep HVAC retrofits as one of the most effective levers for improving environental, social and corporate governance performance.

“We start with deep HVAC optimisation with a five-year payback guarantee, then reassess location and need for use,” Ascough said.

Much of the change affecting strategy in the development world is driven by regulation, with new requirements dictating how the industry approaches its carbon use strategy.

“Future Homes and retrofit-first policies will push the rest of the industry,” Buro Happold Director Philippa Garnett said, highlighting climate risk as another core due diligence consideration.

She said addressing existing stock is not just a compliance exercise but also a strategic opportunity for long-term value.

“You need to look at how a building might struggle in the future — for example, floor-to-ceiling glass that overheats,” she said. “And think about replacement cycles. Don’t add embodied carbon if you can avoid it.”