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The real estate sector these days is in the need of a desperate approach to become more sustainable. With the advancements of technology, the consumers’ expectations are also growing. Every business across almost every industry is now leveraging innovative models to deliver sustainable, improved and convenient service to its customers. This is why real estate also needs to wake up to the innovative approach that can lead the sector to the next level.

In a World Green Building Council report, the building and construction sector accounts for 39 percent of global carbon emissions, with operational emissions, from energy used to heat, cool and light buildings, accounting for 28 percent.

However, leveraging models based on the circular economy can help accomplish considerable financial returns while minimizing its resource footprint and contributing to decarbonization. Able to decouple economic growth from resource consumption, circular economy presents a viable alternative to sustainability for real estate.

Making Circular Real Estate

The circular economy model has already proved its efficiency in other sectors and now is becoming a vital concept in the built environment. Unlike the traditional economy system or linear economy model, which is based on extract, produce, consume and throw away, circular economy presents essential ecosystems, including ecodesign, industrial ecology, the economy of functionality, reduce, reuse, remanufacture or recycling.

Last year, Accenture estimated that the circular economy could bring nearly US$4.5 trillion of economic growth by reducing resource waste that has become latent in the modern economy. This will have an enormous impact on real estate companies’ bottom line, and their environmental impact.

The concept of the circular economy today is taking root in the construction sector, especially in the design phase due to the integration of the Cradle-to-Cradle (C2C) concept. It recommends designing each object or product in such a way where it is recyclable or biodegradable to infinity. From design to construction, and operation to deconstruction, real estate companies are now increasingly adopting this new sustainable theme to put the circular economy at the core of its model.

The circular economy is often taken in place by action plans focusing on the eco-design of projects, selective deconstruction, reuse or recycling of materials. Fortifying these practices, it needs to explore the possibilities in terms of actions during building operations as well as the exiting focus on the construction and deconstruction phases of a building.

In the future, most buildings will need to work much harder, adapting utilization at different times of the day or distinct periods in their lifecycle. Thus, it requires real estate companies to think upfront about zoning and space planning, sub-metering arrangements, provision for altering the building envelope, the possibility of future expansion or extension and designing for various uses.

The latest report from Arup, a leading design and engineering firm, in collaboration with the Ellen MacArthur Foundation, delineates five circular real estate models. They are Flexible spaces, Adaptable assets, Relocatable buildings, Residual value, and Performance procurement.

Thus, the circular economy in real estate is not as much tougher as it seems. But it requires a highly integrated approach to the design and construction process and a very robust ethos to be shared among every single stakeholder in the process. Moreover, the effective and successful adoption of this economic model will rely heavily on the buy-in of investors. So, the significance of investors’ risk perception and desire, along with the understanding of assets’ financing need to be considered.