Article | Creating Resilience
Why Green Day has fallen short for the real estate industry
March 31, 2023 4 Minute Read
Today, as a part of the UK government’s ‘Green Day’ it released three documents aimed at setting out the UK’s path to net zero. These were the Green Finance Strategy, Net Zero Growth Plan and Energy Security Plan.
In these three documents, CBRE believes there are two new and positive announcements for commercial real estate:
- There will be an industry consultation on the UK Green Taxonomy by Autumn 2023.
- The establishment of a new Solar taskforce, with the aim of developing a solar delivery plan for homes and small businesses.
While CBRE welcomes these new announcements, they do not constitute the comprehensive net zero transition strategy that the real estate industry needs.
Approximately 30% of UK emissions are produced by real estate (c. 40% globally). We feel the policies announced today seriously underrepresent the importance of real estate, both as an investment class and its potential to tackle the root causes of climate change.
Many of the references to real estate in today’s publications revisited existing proposals and added little in terms of new policy. The focus remains on transitioning to low carbon heating systems such as heat pumps as the main driver of decarbonisation. While this is a positive move, it does not address energy inefficiency, a fundamental issue which must be rectified across both domestic and commercial real estate if the industry is to meet net zero.
Moreover, the Great British Insulation scheme that aims to improve the energy efficiency of 300,000 households will only affect a fraction of the 27 million homes that the UKGBC argues are in need of retrofit. Leaving the vast majority without support in their transition to net zero. There is no similar scheme available to commercial real estate.
CBRE would have welcomed additional policy announcements on energy efficiency improvements for real estate. Specifically, clarification of the government’s proposed plans to increase the minimum energy efficiency standards (MEES) would have been well-received by the industry. Currently, uncertainty may be stunting efforts to improve building efficiency as the industry waits to see what form MEES regulation will finally take.
Similarly, clarity on the governments proposals to introduce a performance-based rating for the energy use of large commercial buildings would have been helpful for the industry.
Furthermore, the removal of VAT from building retrofits, as recommended by the Skidmore review, would have been another positive move.
The absence of a comprehensive net zero transition strategy for real estate in today’s announcements is consequently a big green disappointment. The lack of policy clarity and market signals for real estate not only threaten to impede the industry’s progress towards net zero but could jeopardise the economy wide transition. However, considering real estate’s importance as an investment class and prominence as a carbon emitter, it feels likely that there must be further policy announcements in the pipeline to address this fundamental gap.
