Commercial real estate emissions: on track, or no progress for 30 years?

COP 27 has renewed calls for the urgent decarbonisation of the global economy. As CBRE has explored previously, the UK appears to have made significant progress on decarbonisation already. It is arguably on track to meet its legally binding net zero commitment by 2050, having reduced net emissions by approximately 50% between 1990 and 2020. 1990 is the baseline year against which UK carbon reductions are officially measured.

However, there is still a lot of work ahead. Almost by definition, to cut UK emissions to net zero, every sector of the economy will have to act, including real estate.

At first glance, the official statistics (see Figure 1) appear to show that both commercial and residential real estate have reduced annual emissions by 59% and 46% respectively, between 1990 and 2020. This makes real estate look broadly on track for net zero.

Figure 1: Estimated UK greenhouse gas emissions by end user

Source: BEIS Final UK greenhouse gas emissions national statistics 1990-2020

However, a closer examination reveals an interesting truth.

The data shown in Figure 1 attributes the emissions generated by power stations to the ‘end user’ sector where energy is consumed. There is good reason for this data to exist in this form, but data based on where emissions are actually generated, rather than where energy is used, shows a quite different picture (see Figure 2).

This data shows emissions ‘by source’ – which means those emissions generated solely and specifically by real estate (for example, by gas boilers) with their electricity usage removed. Here, almost all the apparent 59% reduction in commercial real estate emissions disappears. In other words, commercial real estate’s apparent decarbonisation is a result of progress towards power sector decarbonisation.

Figure 2: Estimated UK greenhouse gas emissions by source

Source: BEIS Final UK greenhouse gas emissions national statistics 1990-2020

By 2020, commercial real estate had reduced annual emissions by just 5% compared to 1990. And this was during the height of disruption caused by COVID-19. In 2019, annual commercial real estate emissions were actually 2% higher than 1990 levels.

The data shows slightly more improvement for residential property. By 2019, annual direct emissions from residential property had decreased 20% compared to 1990 (Figure 2). This suggests steps are being taken in the residential sector to improve energy efficiency, although warmer weather could have been a factor in reducing heating demand and resulting emissions.

There is also some good news for ‘embodied carbon’ in the detail of the statistics. As a result of the UK’s shift towards more efficient industrial processes, in 2019, UK cement and brick manufacture produced 39% and 48% fewer emissions respectively, than in 1990.

If the stock of commercial real estate has grown over the last 30 years, this would effectively lower emissions per sq ft. But even if that is the case, real estate’s overall emissions - not just its emissions per sq ft – will need to reduce to near zero to achieve net zero. Therefore, this overall picture serves as a call-to-action for accelerated building decarbonisation.

While building owners and landlords have made progress in transitioning to greener electricity, there is a limit to how long they can primarily rely on this source of lower emissions. The same dataset shows that the power sector has already eliminated over two-thirds of its emissions. The Government plans to completely decarbonise the sector by 2035, at which point the direct emissions of real estate will become increasingly prominent.

When looking at emissions generated solely by each sector of the economy, excluding power sector influence, we see that real estate’s share of UK emissions has increased, while other sectors decarbonise faster. Rising from 13% in 1990 to 21% in 2020, the higher this share gets, the more urgent the need for action becomes. Now is the time for commercial real estate to expand and accelerate strategies to achieve significant emission reductions. The real estate sector must widely adopt high-performance design, thermal efficiency improvements, and transition to low carbon and electrified heating systems to become part of the solution for a net zero carbon future.