Interview: practitioners on low-carbon buildings & retrofits

In 2024, a landmark JLL report revealed that by 2030, more than 70% of demand for low-carbon office space across 21 major global cities will remain unmet—a staggering supply-demand gap that underscores both the urgency and the investment opportunity in building decarbonization. With buildings accounting for 39% of global energy-related carbon emissions and over 70% of today's structures projected to remain standing through 2050, the retrofit imperative has never been clearer. The global low-carbon building market, valued at $654 billion in 2024, is projected to reach $1.6 trillion by 2034, growing at nearly 12% annually. Yet current renovation rates hover at just 1% per year—triple that pace is required to meet Paris Agreement targets. This article synthesizes insights from practitioners navigating the complex trade-offs inherent in building decarbonization, drawing from city and utility pilot programs to illuminate what actually works on the ground.

Why It Matters

The built environment represents one of the most consequential—and stubbornly difficult—sectors to decarbonize. Buildings consume 36% of global energy and generate 42% of annual CO₂ emissions when accounting for both operational and embodied carbon. Unlike transportation or power generation, where fleet turnover and infrastructure upgrades can accelerate transitions, buildings persist for 50–100 years, locking in energy consumption patterns and emissions profiles for generations.

The economic stakes are substantial. McKinsey projects the global building retrofit market will grow from $500 billion in 2024 to $3.9 trillion by 2050, an 8% compound annual growth rate that dwarfs most infrastructure sectors. Investment in building retrofits across China, the US, and the EU increased 20% since 2019, reaching approximately $120 billion in 2024 (World Economic Forum, 2024). For investors, the opportunity lies not only in direct retrofit activities but across the entire value chain: building envelope technologies, HVAC electrification, energy management systems, building analytics platforms, and innovative financing mechanisms.

Regulatory pressure is intensifying. New York City's Local Law 97 mandates 25% emissions reductions by 2024 and 40% by 2030 for buildings over 25,000 square feet, with penalties reaching $268 per metric ton of excess emissions. The EU Energy Performance of Buildings Directive (EPBD) recast requires zero emissions for all new buildings from 2027 and renovated buildings from 2030. France's Décret Tertiaire mandates 40% energy reduction by 2030 and 60% by 2050 for commercial buildings exceeding 1,000 square meters.

For emerging markets, where urbanization continues at unprecedented rates, the decisions made today about building standards and retrofit programs will determine emissions trajectories for decades. The International Energy Agency's Net Zero Scenario requires over 2% annual deep renovation rates from 2024–2030—more than double current performance in most jurisdictions.

Key Concepts

Understanding the terminology and measurement frameworks practitioners use is essential for effective investment and policy decisions.

Deep Retrofit vs. Shallow Renovation: Shallow renovations address individual building components (lighting upgrades, window replacements) and typically achieve 10–20% energy savings. Deep retrofits comprehensively address the building envelope, HVAC systems, lighting, and controls simultaneously, targeting 50–75% energy reductions. Research indicates deep retrofits generate 50–75% less embodied carbon than equivalent new construction.

Energy Use Intensity (EUI): Measured in kBtu per square foot per year, EUI provides a normalized metric for comparing building energy performance across property types and sizes. Multifamily deep retrofits achieved average 33% reductions in site EUI in a study of 46,600 buildings across 14 markets (Building Energy Exchange, 2024).

Embodied Carbon: The emissions associated with building materials, construction, and eventual demolition—typically 11% of global building emissions. Unlike operational carbon, embodied carbon is locked in at construction or renovation and cannot be reduced through operational improvements.

Energy-as-a-Service (EaaS): A financing model where building owners pay a monthly fee covering equipment, installation, maintenance, and performance guarantees, eliminating upfront capital requirements. This model has proven particularly effective in overcoming the split-incentive problem in commercial real estate.

Sector-Specific KPI Ranges for Building Retrofits

KPI	Commercial Office	Multifamily Residential	Industrial/Warehouse
Site EUI Reduction	30–50%	25–40%	20–35%
GHG Emissions Reduction	40–80%	35–65%	30–50%
Simple Payback Period	5–15 years	7–20 years	3–10 years
Retrofit Cost per ft²	$15–$75	$20–$100	$8–$40
Annual Energy Savings	$1.50–$4.00/ft²	$0.75–$2.50/ft²	$0.50–$2.00/ft²
Building Envelope Contribution	40–55%	45–60%	25–40%

What's Working

Industrialized Prefabrication: Companies like ecoworks in Germany have pioneered factory-prefabricated facade systems that dramatically reduce on-site disruption and construction timelines. Their approach transforms multifamily buildings into "power plants" by integrating photovoltaics and heat pumps during envelope replacement. Tenant displacement—traditionally a major barrier—drops from months to days.

Energy-as-a-Service Models: BlocPower, which has raised $266.6 million plus $130 million in debt financing as of 2023, retrofits buildings with all-electric heating and cooling systems at no upfront cost to building owners. By handling financing, installation, and maintenance, they've addressed the capital constraint that historically blocked small and medium building owners from participating in decarbonization. Their portfolio spans thousands of buildings across New York City and Oakland.

Integrated Smart Building Systems: The convergence of IoT sensors, cloud analytics, and machine learning enables continuous optimization of building energy systems. Schneider Electric, Johnson Controls, and Honeywell have developed platforms that integrate disparate building systems—HVAC, lighting, access control—into unified management dashboards. Research from JLL indicates these systems can reduce energy consumption 10–25% through optimization alone, before any physical retrofit work.

Aggregated Utility Partnerships: Energy Impact Partners' model of embedding venture capital within utility partnerships has created a pathway for pilot-to-scale transitions. Utilities provide customer access, regulatory navigation, and deployment capital; startups provide technology and operational innovation. This model has accelerated time-to-scale for building efficiency technologies by providing real-world testing environments and established customer relationships.

Municipal Performance Standards: Building performance standards (BPS) in cities like Washington D.C., Boston, and Denver create regulatory certainty that mobilizes private capital. When building owners know that compliance timelines and penalty structures are fixed, they can incorporate retrofit expenditures into capital planning cycles and refinancing decisions.

What's Not Working

Fragmented Retrofit Delivery: The typical retrofit involves multiple contractors—envelope, HVAC, electrical, controls—with limited coordination and no single point of accountability. Cost overruns of 20–40% are common, and achieved energy savings frequently underperform engineering projections by 15–30%. One-stop-shop retrofit providers remain the exception rather than the rule.

Workforce Constraints: The building trades face a structural workforce deficit. BuildForce Canada estimates 500,000 additional workers will be required to meet government decarbonization targets, while 22% of the current workforce will retire within the next decade. Similar shortages exist across Europe and the United States. Training pipelines have not scaled to meet demand, and prevailing wage structures often fail to attract new entrants.

Split Incentives in Rental Properties: Building owners bear retrofit capital costs while tenants capture energy savings through reduced utility bills. Despite decades of policy attention, this misalignment remains the single largest barrier to multifamily and commercial rental property decarbonization. Green lease provisions and on-bill financing mechanisms help but remain underutilized.

Financing Gaps for Deep Retrofits: While energy-as-a-service works for equipment upgrades with clear payback periods, comprehensive deep retrofits—particularly those requiring envelope improvements—rarely achieve the 5–7 year payback periods that most corporate capital allocation processes require. C-PACE (Commercial Property Assessed Clean Energy) financing has grown but remains unavailable in many jurisdictions.

Policy Uncertainty and Implementation Lag: Ambitious targets without clear compliance pathways create planning uncertainty. The US SEC climate disclosure rule, after years of development, faces ongoing legal challenges. European building regulations, while comprehensive on paper, often lack the enforcement mechanisms and technical assistance programs necessary for widespread compliance.

Key Players

Established Leaders

Schneider Electric (France): Global leader in digital automation and energy management, offering integrated platforms spanning building management systems, power distribution, and sustainability analytics. Their EcoStruxure platform provides real-time optimization across building portfolios.

Johnson Controls (United States): Dominant position in commercial HVAC systems and building automation. Their OpenBlue platform integrates AI-driven analytics with physical systems. Over 40% of Fortune 500 corporate headquarters use Johnson Controls building systems.

Siemens Building Technologies (Germany): Comprehensive portfolio spanning fire safety, building automation, and HVAC. Their Desigo CC platform provides centralized management across building systems with cloud-enabled remote diagnostics and optimization.

Honeywell Building Technologies (United States): Integrated solutions combining hardware, software, and managed services. Their Forge platform uses machine learning to optimize energy consumption and predict equipment failures.

AECOM (United States): Global infrastructure consulting firm with significant building retrofit project delivery capabilities, particularly for large corporate and institutional portfolios.

Emerging Startups

BlocPower (United States): Energy-as-a-service provider focused on building electrification. Has raised $266.6 million in equity and $130 million in debt to fund building retrofits at no upfront cost to owners.

ecoworks (Germany): Industrial prefabrication for residential building retrofits. Has raised €78.9 million to scale factory-based facade production that integrates PV and heat pumps.

Redaptive (United States): Energy-as-a-service platform with $1.7 billion in deployment capacity for commercial and industrial energy efficiency projects.

Aeroseal (United States): Building envelope air sealing technology that addresses duct leakage and building infiltration—often the largest source of energy waste in existing buildings. Has raised $119 million.

Kontrol (Canada): Integrated smart building platform combining hardware, software, and retrofit services for commercial buildings. Has raised $50 million to date.

Key Investors

Fifth Wall: Largest PropTech-focused venture capital firm with specific thesis on built environment decarbonization. Portfolio includes building materials, energy efficiency, and construction technology companies.

Energy Impact Partners (EIP): $1.36 billion Fund III closed in late 2025. Unique model of utility partnerships provides portfolio companies with customer access and deployment capital.

Breakthrough Energy Ventures: Bill Gates-backed fund with significant exposure to building decarbonization including materials, HVAC electrification, and energy storage relevant to building applications.

Clean Energy Ventures: Over $400 million AUM across two funds targeting 2.5 gigatons of CO₂ reduction by 2050. Active in early-stage building technology investments.

World Fund: European-focused fund with €300 million targeting scalable decarbonization across energy, buildings, and manufacturing sectors.

Examples

1. Federal Buildings Deep Retrofit Pilot (Canada): Natural Resources Canada executed a comprehensive deep retrofit of a 440,000 square foot 1950s-era federal office building, achieving 69% energy reduction and 80% GHG emissions reduction. The project demonstrated that mid-century commercial buildings—often considered economically unviable for retrofit—can achieve near net-zero performance when envelope, HVAC, and controls are addressed simultaneously. Lessons learned have been incorporated into federal building standards and shared with provincial governments.

2. MacKimmie Complex, University of Calgary (Canada): This academic building retrofit achieved 80% energy reduction and 85% EUI reduction through comprehensive envelope replacement, HVAC electrification, and advanced controls integration. The 25-year simple payback on current utility costs—while long by private sector standards—demonstrated viability for institutional portfolios with longer investment horizons and explicit sustainability mandates. The project has become a reference case for Canadian university building portfolios.

3. BlocPower Oakland Deployment (United States): BlocPower's partnership with the City of Oakland to electrify 32,000 buildings demonstrates at-scale municipal deployment of energy-as-a-service models. By aggregating demand across diverse building types—multifamily, commercial, civic—the program achieves equipment procurement efficiencies and workforce utilization rates impossible for building-by-building approaches. Early results show average 30% energy cost reductions and near-complete elimination of on-site fossil fuel combustion.

Action Checklist

• Benchmark portfolio EUI against local building performance standards and peer buildings to identify priority retrofit candidates
• Conduct ASHRAE Level II energy audits for buildings in the highest consumption quartile to establish baseline conditions and identify measure packages
• Evaluate C-PACE financing availability in operating jurisdictions as a mechanism for shifting retrofit capital to property tax assessments
• Engage with energy-as-a-service providers (BlocPower, Redaptive, Urban Volt) to understand no-upfront-capital pathways for HVAC and lighting
• Incorporate green lease provisions in new and renewing tenant agreements to enable pass-through of retrofit capital costs
• Establish internal carbon pricing of $50–100/ton to reflect emerging regulatory costs in retrofit ROI calculations
• Map workforce availability and contractor capabilities in target markets before committing to retrofit timelines
• Participate in local utility incentive programs and federal/state tax credits to reduce net retrofit costs by 15–30%

FAQ

Q: What is the typical payback period for a deep building retrofit, and how can it be shortened? A: Deep retrofits typically achieve 7–15 year simple payback periods depending on building type, energy prices, and measure selection. Payback can be shortened through utility incentive capture (typically 15–25% of project cost), tax credit utilization (including 179D deductions for commercial buildings), green financing with below-market rates, and energy-as-a-service structures that convert capital expenditure to operating expense. Buildings facing regulatory penalties (such as NYC Local Law 97) should incorporate avoided penalty costs in ROI calculations, which can reduce effective payback periods substantially.

Q: How do practitioners manage tenant disruption during comprehensive retrofits? A: Leading practitioners sequence retrofit work to minimize occupied-space disruption. Exterior envelope work (facade, windows, roof) typically proceeds without tenant displacement. HVAC upgrades are scheduled during low-occupancy periods or executed in phases with temporary cooling/heating provisions. Prefabricated components—pioneered by ecoworks and others—reduce on-site work duration by 50–70%. For unavoidable displacement, retrofit budgets should include tenant relocation provisions and communication programs. Some practitioners achieve "tenant-in-place" deep retrofits through night and weekend work, though labor costs increase 20–40%.

Q: What building types offer the best retrofit economics, and where should investors focus? A: Multi-tenant office buildings in jurisdictions with building performance standards offer the most compelling economics: regulatory compliance requirements create certainty, and aggregated tenant demand supports premium rents for certified green buildings. Industrial and warehouse facilities offer attractive payback periods (3–10 years) through lighting and HVAC upgrades but smaller absolute energy savings per square foot. Multifamily affordable housing, while socially impactful, typically requires subsidy stacking given constrained rent structures. Healthcare facilities and laboratories present technical complexity but substantial energy intensity (3–5x typical office EUI) that enables attractive retrofit economics when specialized contractors are engaged.

Q: How reliable are projected energy savings from retrofit engineering studies? A: Engineering projections systematically overestimate achieved savings by 15–30% in most building types. This "performance gap" arises from occupant behavior variations, commissioning shortfalls, and maintenance lapses. Investors should apply 70–85% realization factors to projected savings in financial models. Performance contracting arrangements—where the retrofit provider guarantees savings and absorbs shortfall risk—transfer this uncertainty to parties better positioned to manage it. Post-occupancy measurement and verification (M&V) protocols, increasingly required by financing sources, help identify and correct underperformance within the first two operating years.

Q: What role does embodied carbon play in retrofit decision-making, and how is it measured? A: Embodied carbon—the emissions from materials, manufacturing, and construction—typically represents 10–20% of lifecycle building emissions but is increasingly scrutinized by sophisticated investors and regulators. Life cycle assessment (LCA) tools like EC3 (Embodied Carbon in Construction Calculator) enable material-by-material carbon accounting. Key decision points include: window frame material selection (aluminum vs. timber), insulation type (mineral wool vs. XPS), and structural interventions. As grids decarbonize, the relative importance of embodied versus operational carbon increases—by 2050, embodied carbon may represent the majority of new building lifecycle emissions. For retrofit decisions, the embodied carbon of intervention materials should be weighed against operational emissions avoided over the remaining building lifespan.

Sources

• International Energy Agency, "Renovation of Near 20% of Existing Building Stock to Zero-Carbon-Ready by 2030 is Ambitious but Necessary" (IEA, 2024)
• JLL, "Low-Carbon Building Supply Gap Report: 21 Global Cities Analysis" (JLL Research, 2024)
• World Economic Forum, "Deep Retrofit Buildings: Carbon Emissions Climate Change" (WEF Stories, February 2024)
• Building Energy Exchange, "High Rise / Low Carbon: Multifamily Deep Retrofits" (BE-Ex, 2024)
• McKinsey Global Institute, "Building Retrofit Market Forecast 2024–2050" (McKinsey & Company, 2024)
• Grand View Research, "Energy Retrofit Systems Market Size Report 2030" (Grand View Research, 2024)
• Natural Resources Canada, "Low-Carbon Building Envelopes for Industrialized Construction and Retrofit" (NRCan, 2024)
• Canada Green Building Council, "Building Sector Emissions Reduction Potential Analysis" (CaGBC, 2024)