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REAL ESTATE: Retrofitting Existing Buildings
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Improving the energy efficiency and environmental performance of existing buildings is a crucial step towards tackling climate change.


altUntil recently, much of the focus and attention of the green building agenda has been on driving sustainability in new buildings. The scale and pace of construction witnessed across Asia in recent years, particularly in China and India, has provided ample opportunity for developers to construct new structures to modern green standards. However, although the region sees a large quantity of new construction every year, the green proportion of which is slowly increasing, the majority of buildings that will be around in thirty years’ time in most markets are already in existence. In some cities, new buildings typically represent just 1-2% of total stock. It is clear, therefore, that the greatest opportunity to reduce primary energy use lies within the existing building stock, and that improving the energy efficiency and environmental performance of existing buildings will be a crucial step towards making significant inroads toward tackling climate change.

According to the U.S. Green Building Council (USGBC), green retrofitting involves any kind of upgrade of an existing building that is wholly or partially occupied to improve its energy efficiency and environmental performance, reduce water use, and improve the comfort and quality of the space in terms of natural light, air quality, and noise, all of which is done in a way that it is financially beneficial to the owner . Most retrofitting processes typically involve improving air conditioning and lighting components, elevators and, in some cases, the building exterior.

Retrofitting holds a number of commercial and environmental advantages over redevelopment. From a financial perspective, retrofitting is more cost effective and means landlords can continue to generate income from their properties as opposed to missing out on what could be as many as four to five years of rental income if they redevelop the property. Indeed, redevelopment is a long and expensive process conducted over a period of several years and requires landlords having to wait for leases to expire, pay for the existing structure to be demolished, the site cleared, and construction of the new structure. From a green perspective, there are significant benefits to be gained from retrofitting existing buildings, such as avoidance of waste associated with demolition and conservation of energy already spent building the existing structure, as opposed to using more energy to construct new buildings.

Retrofitting can also have a significant impact on the bottom line, with improved energy efficiency and reduced water usage resulting in operational savings. In 2010, a study by Arup and Davis Langdon for the Property Council of Australia found that green retrofits produced a return of better than 10% on investment . The study, which analysed a city centre office tower, a city fringe high rise and a suburban office, all of which were built in the 1980s, provided clear evidence that upgrading an existing building to achieve a minimum 4.5 star NABERS rating could provide a positive return on investment for building owners. “Retrofitting makes economic sense in most cases,” says Dr. Vincent Cheng, Head of Building Sustainability for Arup in Hong Kong. Tenants in Asia are already actively seeking green buildings, so retrofitting helps future-proof market positioning of the asset.

altIn many cases a property is vacated when a retrofit is conducted, but quite often the process is completed with tenants still occupying the building. “Basic retrofits involve enhancing energy efficiency by installing new air conditioning systems including chillers, boilers, air distribution systems, Building Management Systems, energy efficient lighting and control systems, solar PV and solar hot water systems and so on,” says Nick Mavropsi, Regional Director for Technical Services (Pacific) for CBRE. “This requires extensive planning, constant communication with all stakeholders and mostly performed outside normal working hours to minimise disruption to tenant atmosphere and without tenants having to move or relocate ,” he explains.

A good example of one such project is China Resources Property Ltd’s upgrade of its 50-storey, 100,000 square metre flagship China Resources Building in Wan Chai, Hong Kong, which started in 2009. When completed, it will be the first building retrofit project in Hong Kong to achieve LEED-CS Gold certification.

Financial considerations were a major factor behind the company’s decision to retrofit instead of demolish and rebuild the property , which was originally constructed in 1983. The entire project is estimated to cost HKD 600 million, but demolishing and rebuilding would have easily cost twice as much in construction costs alone. Redevelopment would also have meant forgoing any revenue from tenants for four to five years. The company estimates that it would have cost HKD10,000 (USD 1,282) more per square metre to redevelop the existing building. Other financial benefits from the retrofit may include the increase in rental income from attracting more multinational tenants looking to occupy space in a green building. The savings in environmental terms will also be significant. Around 81% of the construction and demolition waste from the project will be diverted from landfill and recycled. China Resources hopes the retrofitted building will achieve energy savings of 11.4% per year and water reduction of 36% per year, whilst reducing carbon emissions by 7.5% or 1,370 tonnes per year.

The China Resources Building retrofit is being carried out in phases, beginning with the property management office, common areas and vacant floors. Conducting a full building retrofit with tenants present is not without its challenges. “We made sure there was always space on one floor for tenants to relocate to if they wished and also utilised space in the exhibition centre for meetings and conferences,” says Beard.

Once the China Resources Building retrofit is complete the building will feature an exterior which optimises daylight and energy consumption. The sealing of this exterior will also reduce the need for air conditioning. Restrooms will be fitted with water conserving toilets, urinals, and faucets. Air handling units will be supplemented by a CO2 metreing system able to determine whether a space is occupied, and to control the amount of air circulated in a space, thereby improving energy efficiency and air quality at the same time.

The market for sustainable retrofitting in Asia is still in its early stages of development as authorities begin to take steps towards offering greater incentives. In Singapore, the Building and Construction Authority created a SGP 100 million fund to help owners of existing buildings with the costs of green building retrofits. The city has already recorded some notable milestones in the area of green retrofitting, with the 33-year HarbourFront Centre recently being awarded a Green Mark Platinum Award. The building was fitted with a new air-conditioning system which resulted in an efficiency improvement of almost 50%, and a more efficient lighting system which reduced electricity costs by more than 30%. Elsewhere, in May 2011 the Asian Development Bank announced it would provide CNY 300 million (USD 46 million) in partial credit guarantees to Shanghai Pudong Development Bank to facilitate lending to private-sector energy efficient building projects in China.

Despite the progress being made in some markets, redevelopment is still preferred by most developers in Asia . “One major obstacle we often find we encounter, particularly in Hong Kong, is the widespread perception that ‘new is better’,” says Dr. Cheng. “Most green buildings in the region are new builds,” he continues. Dr. Cheng says many building owners in the region lack knowledge on whether to retrofit or redevelop their property, or whether it should undergo a major or minor refit.

China represents the biggest opportunity in the region, with the government having been very proactive in introducing stringent energy codes and other legislation which is helping drive the market for sustainable retrofitting.

Whilst the construction of modern new green buildings gathers pace across the region, retrofitting existing structures represents an effective high-volume, low-cost approach to tackling climate change. The combination of lower operating costs and higher asset value for a smaller proportion of the outlay compared to redevelopment means climate change is not the only justification; retrofitting makes economical sense as well.
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As governments across the region gradually introduce stricter building codes and mandate greater energy efficiency in buildings, owners will be forced to respond by retrofitting their existing properties. Some are already one step ahead. “China Resources Property is currently retrofitting several of our properties in Bangkok but the rationale is not about achieving a rental premium in the market,” says Amber-Marie Beard. “It is being done to hang on to key international tenants with a commitment to corporate social responsibility, who may be tempted to leave for some of the newer LEED certified stock which is about to come on stream. So it’s not about the rents, it’s about staying competitive,” she adds.


By Jonathan Hills, Associate Director and Editor-in-Chief, CBRE Research Asia

NB: This is an abridged version of an original article that appeared in the last edition of CBRE Sustainability Asia Pacific

 
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