Stranded assets

Stranded assets are most often referred to in terms of energy – power stations abandoned as solar, wind or other “green energy” technologies overtake the supply of electricity.  

However, the commercial property market is also facing the risk of stranded assets. 

Countries around the world, including South Africa, are accelerating the uptake of green building materials and practices to achieve net-zero goals.  

In this excerpt from the World Green Building Council (WorldGBC) report, titled “Beyond the business case”, the issue of stranded assets is explored. Two case studies show that re-using existing buildings with the addition of sustainable initiatives, rather than building new, or demolishing and rebuilding, has more than just financial benefits.  

Stranded assets defined  

Stranded assets

Redefine Properties’ 90 Rivonia Road, Sandton. Image credit: www.redefine.co.za 

Stranded assets are defined as assets that suffer from unexpected and often premature financial devaluation, often warranting to a loss of investment. The risk of stranded assets in the built environment caused by environmental factors, such as the impacts of climate change, both physically on the asset itself and via associated policies to tackle the climate crisis, such as sustainability goals, has become a topic of increasing importance. 

Built environment risks 

Focussing on the built environment, stranded assets present a major risk to both existing building and infrastructure assets, plus these under construction. Extreme weather events can damage or delay projects in construction processes, disrupt supply chains and delay work programmes, can cause physical damage and system stresses to existing assets, and impact insurance premiums, all with financial repercussions. Additionally, increasing policy requirements can lead to non-compliant assets suffering from plummeting value. 

Therefore, a sustainable building or infrastructure project that has resilience measures embedded within it, both in terms of physical climate impacts but also futureproofing against future compliance measures, presents a lower risk in terms of stranded assets.  

Case study: Repurpose, re-use 

Stranded assets

Stranded assets present a major risk to existing building and infrastructure assets.

The Acciona Ombú development in Madrid, Spain, comprises over 10 000m² of new office space, combining private and public land with green landscape by restoring an abandoned, historic industrial building built in 1905. This restoration has offered substantial financial and environmental benefits: 

  • By retaining the existing building, specifically the re-use of masonry walls and primary steel, 30% of the embodied carbon related to structures and 50% of the embodied carbon related to the facade were avoided with an overall reduction in embodied carbon (included allowance for future refurbishment) of 25% across the whole lifecycle compared to a typical new office building  

The restoration of the historic building re-used 10 000 tons of brick. 

  • The return on investment from energy efficiency is highly significant in this development: 35% energy savings over the ASHRAE baseline equates to savings of about EUR €60 500 per year, which results in savings of about EUR €3,5 million over the lifecycle of the building.
  • These financial benefits from energy efficiency are boosted by a further 10% saving, considering both waste and water savings.
  • Combining the 35% energy efficiency with 100% renewable energy supply avoids close to 5 700 tons CO being released into the atmosphere. Furthermore, the new internal timber structure will store 1 640 tons CO and is recyclable and demountable.
  • The development has also increased the social value and community benefit by creating a positive multiplier effect in an important and accessible area of the city that had been previously deprived.  
  • Through net social impact modelling, it is estimated that 800 jobs in the local community have been provided by this development.
  • The net asset value of the building has increased substantially, considering both operational savings and refurbishment measures. 

Case study: Measured performance 

Three properties in Gauteng – 90 Rivonia, 2 Pybus and Rosebank Link – previously achieved four-star ratings when they were redeveloped. In 2023, Redefine Properties successfully achieved a Net-Zero Carbon Level 2 Measured certification by the Green Building Council of South Africa (GBCSA) for the each of the three properties. This milestone marks the first time that commercial buildings at scale in South Africa have attained a “measured” rating, based on actual performance data, including tenant consumption. 

Redefine Properties has achieved its Net Zero Level 2 Measured ratings through a combination of energy efficiency-enhancing projects, on-site renewable energy installations (where possible) and carbon offsets traded through a well-established voluntary carbon offsetting programme. A key component of these buildings is the focus on optimising energy efficiency as the first step in the net zero journey. 

Issue: Existing buildings with no sustainability interventions are at risk of becoming stranded assets. 

Solution: There is a business case to be made for re-using and redeveloping existing structures into sustainable green buildings reducing construction risks and futureproofs built assets. 

 

Full acknowledgement and thanks go to https://worldgbc.org/ and https://gbcsa.org.za/ for the information in this article. 

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