Inside the business case for adaptive reuse: “Preserve More – More Value” is out now
In a new report, CEBRA and Søren Jensen join a group of investors in taking a closer look at the basis for deciding whether to retain an existing building or demolish it and build anew. The analysis shows why the business case favours new builds – until climate impact and social value are made visible and the framework conditions change.
If the construction industry is to deliver the green transition, retaining more of our existing buildings is essential. Despite this recognition, a significant barrier remains in practice. Today, construction investments are assessed primarily on traditional financial parameters, with returns and risk profiles carrying the most weight. As a result, renovation and adaptive reuse are often rejected in favour of new builds, even when the environmental and social benefits are substantial.
In the new open-source report, “Preserve More – More Value: Broadening the Business Case for Renovation and Adaptive Reuse”, CEBRA and Søren Jensen explore how to make renovation and adaptive reuse more competitive. The report is supported by Bevar Mere – a joint industry initiative by Grundejernes Investeringsfond, Dreyers Fond, Landsbyggefonden and Realdania.
The report was developed in close collaboration with an investor panel, a researcher panel and a value chain panel. The investor panel comprises representatives from KIRKBI, PensionDanmark Ejendomme, Ikano Bolig, Færchfonden and Catella Denmark.
“We have focused on getting inside the room where the decision is actually made. It is not enough to document that adaptive reuse can have a lower climate impact or create social value if these factors never factor into the information the investment committee considers. We therefore took the investors’ own process as our starting point and examined where it could be broadened to provide a stronger basis for decision-making,” says Stina Rask Jensen, Head of Transformation and Conservation at CEBRA.
The report’s conclusions follow two tracks: opportunities within the investor’s sphere of influence and opportunities within the construction industry’s wider framework conditions and national building code.
Investor decision-making – not all value needs to be expressed in economic terms
The report identifies a clear need to broaden the scope of investor decision-making. Decisions should not rely solely on conventional financial and risk metrics but should also consider social and environmental value directly as part of the investment appraisal.
The project explored several methods for making these values visible, including models that assign a monetary value to social and environmental benefits. However, its findings show that not all value can or should be expressed in monetary terms.
“Investors should take a more holistic approach to their investments. They need to improve how they measure and internally communicate social and environmental performance as standard KPIs throughout the investment process,” Carl-Johan Collet of Catella Denmark writes in the foreword.
The report recommends setting objectives for climate impact and social value at the initial screening stage, alongside financial and risk targets. The same scenarios – such as renovation, adaptive reuse and new construction – should then be assessed against all four criteria.
For climate impact, scenarios can be compared based on factors such as their expected carbon footprint and impact on biodiversity. During the early investment phase, this can be done using benchmark data and informed estimates, making the differences visible before resources are committed to more detailed analyses.
For social value, the scenarios are assessed according to their potential to benefit both the building’s users and the surrounding area. This could include the value people attach to traces of the past and the opportunity to build on existing social ties – or the potential to reduce the risk of reputational damage associated with demolition.
“There will always be considerations that cannot meaningfully be reduced to a single financial metric. The point is therefore not to put a price on everything, but to make the differences between the scenarios clear so that they genuinely inform the decision,” says Stina Rask Jensen.
These assessments are included in the investment report, placing climate impact and social value alongside conventional financial and risk metrics when the investment committee makes its decision. This alone will not necessarily change every investment decision, but it ensures that the social and environmental consequences are visible and recognised as legitimate and necessary points of discussion.
The wider Danish framework – current conditions fall short
At the same time, the report emphasises that investors cannot drive this shift alone. Voluntary measures within the investment process will not be enough for renovation and adaptive reuse to compete with demolition and new construction on more equal financial terms. Changes to the wider regulatory and market framework are needed to create genuine scope for solutions with a low climate impact and high social value – outcomes that benefit society as a whole, not only the individual investor.
Based on discussions with the investor panel, the report tests the following measures:
- Changes to permitted development density, for example by granting additional development rights
Property tax exemptions
Shorter vacancy periods, achieved in part through simplified approval processes
Lower construction costs resulting from changes to the Building Regulations and improved conditions for technical consultants
Environmental taxes linked to carbon emissions and biodiversity loss
In conclusion, no single measure is enough to tip the business case. The combined effect of several measures, however, is sufficient to tip the business case – but this will require a combination of measures if the investment case for renovation and adaptive reuse is to change in practice.
Overall, the report shows that investors cannot drive this shift alone. Voluntary measures within the investment process will not be enough for renovation and adaptive reuse to compete with demolition and new construction on more equal financial terms. Changes to the wider regulatory and market framework are needed to create greater scope for retaining buildings in ways that deliver both a low climate impact and high social value – outcomes that benefit society, not only investors.
Thank you to everyone who took part in the launch and contributed to the report. The project is supported by Bevar Mere – a joint industry initiative by Grundejernes Investeringsfond, Dreyers Fond, Landsbyggefonden and Realdania.
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