From Risks to Opportunities: Holistic Retrofit Strategies to Stabilize Asset Value

Hong Kong buildings account for 90% of total electricity consumption and around 60% of greenhouse gas emissions. Therefore, buildings present both challenges and opportunities for reduction in energy use and carbon emissions.  As most of the buildings that will be used in 2050 already exist today, retrofitting existing buildings is widely recognized as a key strategy to mitigate the effects of climate change, meet built environment decarbonization targets and avoid stranded assets.

With a growing portfolio of stranded assets where buildings are neglected and becoming undervalued, Hong Kong needs to look beyond just green-certified or high performing built assets, to scale retrofit action across the wider building stock as a key strategy to achieve the city’s 2050 carbon neutrality target.

Building services, or HVAC in particular, has been a strategic target for retrofits to enhance energy efficiency in Hong Kong. Much less attention has been paid to the role of building facades and its interdependencies with building services retrofit measures to maximize opportunities that may be limited by implementing ad hoc retrofit interventions. Although evidence demonstrates the benefits of retrofitting facades to reduce energy demand and mitigate carbon emissions whilst enhancing daylighting, thermal comfort and climate resilience of a built asset, it often becomes a secondary consideration in retrofit strategies due to perceptions of higher upfront costs, longer term returns, disruption to business operations and split incentives between owners and tenants. However, building envelope improvements are generally necessary to achieve higher levels of energy performance with compounded savings, and to ensure that buildings can perform safely and efficiently under more variable climate conditions and higher frequency of extreme weather events.

Against this context, IXO argues for greater focus and further work in the following areas:

Integrated approach to building retrofits -  Studies show that building envelopes and building services are often considered in isolation from each other, even though there are numerous interdependencies between these retrofit measures that could positively or negatively impact the combined performance outcome at the building level. An integrated retrofit framework with considerations of both envelope and service measures, across the light, medium and deep retrofit spectrum, can provide a more holistic and systemic approach to building retrofits to deliver compounded savings and value-added benefits.

Portfolio approach and economies of scale - Retrofitting at the portfolio level, taking the integrated approach above together with climate risk assessments, creates opportunities that individual buildings cannot achieve on their own. Buildings of a similar age and conditions for example could share similar technologies, materials and structural composition, making it possible to identify assets for parallel upgrades and staged improvements for economies of scale. Considered with lease and maintenance cycles, a portfolio approach can reduce costs, enhance safety, comfort and asset value, as well as increase asset resilience to climate impacts, to minimize the risk of stranded assets.

Embodied carbon of retrofits - Retrofitting energy inefficient buildings has focused on reducing energy consumption and operational carbon emissions. With increasing contribution of embodied carbon to global emissions as operational efficiencies improve, retrofits can minimize embodied carbon to reduce the absolute carbon emissions of building asset. An integrated approach can weigh the additional embodied carbon emissions from retrofits against savings in operational carbon emissions over a building lifespan to arrive at the lowest overall emission scenario.

Building a robust evidence base - More robust evidence is needed demonstrate the performance of integrating and bundling of building envelope and service retrofit measures. While various multi-criteria decision-making models facilitate high level examinations and estimations, more demonstration projects and practical case studies are needed to understand the interdependencies of measures, with actual technical and economic data (including paybacks, asset value and rental premiums) to support balanced retrofit approaches.

Further investigation of the above areas would inform a more holistic and optimal retrofit strategy to transition individual buildings or portfolios of built assets towards Hong Kong’s climate goals.