Identifying what is required is one thing, but coming up with a practical plan to do it is a different matter. Progress in retrofitting the existing building stock has been slow because there are substantial hurdles to be overcome, which typically fall into two categories: practical and financial.

From a practical perspective, most buildings were simply not designed with retrofitting in mind. Once the “quick wins” have been secured, the remaining improvements necessary can be invasive and difficult to implement while a tenant is in occupation. Lease structures mean that building owners may have limited rights to make retrofit upgrades, while occupiers will understandably be reluctant to incur the costs or disruption associated with major building works unless they result in a direct and realizable benefit during the term of the lease.

Occupiers are increasingly keen to minimize their carbon footprint4 and if the perceived benefits of upgrading their space, whether financial or otherwise, are sufficient then they may be keen to collaborate with the landlord in finding a workable solution. This is particularly the case where the property has strategic importance in the occupier’s overall workplace strategy, and they envisage remaining in occupation beyond the term of the existing lease. In such cases, recent experiences of remote working and the adoption of more flexible working practices may well facilitate vacating the space for the duration of the works without undue disruption.

As challenging as the practical difficulties may be, the primary barrier to retrofitting buildings can often be cost and financing. It is extremely difficult to generalize about the cost involved given that what is involved will vary enormously from one building to another. Upgrading a well specified 1990s building is a very different prospect to an older brick-built structure that may date back to the early 1900s.

It is even harder to generalize about whether such expenditure makes commercial sense, given the huge variation in rental and capital values between and even within markets. The fact that so little retrofitting is underway suggests that either the issue has yet to register on the radar of most building owners, or that such retrofits do not – as things stand – appear cost effective and commercially viable. If the former, one suspects the level of activity is set to rise dramatically of its own accord. However, experience of working with many major investors suggests that developing a watertight financial case for a retrofit is often a challenge – a problem that urgently needs to be addressed.

Where the operational energy savings from a retrofit are significant and demonstrable, this can create a “revenue” stream that can be used to fund the initial capital expenditure. There are various ways this could be utilised to finance the work required. Reduced operating costs together with other realizable intangible benefits to the occupier may result in a higher level of rent. Alternatively, depending on the way the lease is structured, the landlord may be able to hold the rent and service charge constant, allowing them to directly capture the benefit of lower operating costs as additional net income6. In many cases, particularly where the tenant will suffer some degree of inconvenience during the works, an apportionment of the financial benefit between landlord and tenant is likely.