15 November 2011 – A World Economic Forum report on the retrofit market says Australia has the most mature market to date, but that’s out off a very low base. The report points to the massive energy savings potential in inefficient buildings and makes a strong call to action on policy makers, which it says have the power to catalyse change.
In a presentation to a joint Australian Property Institute and Property Funds Association conference in Sydney on Monday lead author Robin Ried, outlined key findings of the report.
A Profitable and Resource Efficient Future: Catalysing Retrofit Finance and Investing in Commercial Real Estate was based on recommendations from six country case studies, China, Japan, US, UK, Germany and Australia.
It quotes McKinsey & Company’s estimate that energy efficiency measures including retrofits would spur the creation of 600,000-900,000 long-term green jobs and $400 billion in investment the United States alone.
Yet “retrofitting remains an anomaly,” the report said.
“In the United Kingdom, for example, the rate of retrofitting existing buildings is less than 1 per cent of the building stock Failure of the market to take off can be attributed to weak demand caused by several structural and market barriers that discourage a range of potentially willing stakeholders – building owners, financial institutions, institutional investors and utilities – from borrowing or lending the capital to finance projects at scale.”
According to the report, “policy-makers hold the power as the single greatest catalyst to spark demand, enable a market and provide structure for all stakeholders to participate.”
Critical roles in unlocking potential are also held by banks, insurance companies, institutional investors, utilities, energy service companies and real estate holders.
Would be investors would also benefit from government-mandated, standardised energy consumption reporting and efficiency rating systems for buildings, combined with additional policies such as tax incentives, loan guarantees or credit enhancements.
In Australia, the more advanced nature of the market was attributed to a long-standing reporting and rating system, as well as additional government-led action, including tax deductions and a third party institution to take on demonstration projects.
“Government and business share an interest in improving energy efficiency in commercial buildings,” said Colin Dyer, President and Chief Executive Officer, Jones Lang LaSalle. “Policies enabling and encouraging cost-effective building retrofits could reduce carbon emissions while driving economic growth through job creation, cost reduction and risk mitigation.”