Circular economy brings value for real estate businesses

New research from Arup, in collaboration with the Ellen MacArthur Foundation, finds that if real estate businesses adopt models based on circular economy principles, the sector can achieve significant financial returns while reducing its resource footprint and contributing to decarbonisation.

The report From Principles to Practices: Realising the value of circular economy in real estate was led by Arup and the Ellen MacArthur Foundation in partnership with the architecture and innovation studio 3XN/GXN and expert advice from JLL and the Royal Institution of Chartered Surveyors (RICS).

The study developed five circular economy real estate business models and tested the financial performance of each using data from real development projects located in five European study cities (Aarhus, Amsterdam, Berlin, London, and Milan). It articulates how circular economy principles can be realised in practice and demonstrates that they could deliver improved financial performance across a range of different building types.

The core idea is to adopt new business models to capitalise on changing spaces. By delivering more flexible, adaptable, and deconstructable buildings - and procuring services instead of products, investors move from making a one-time bet to owning more productive, agile, and less damaging assets that offer new revenue streams and greater residual value.

“It’s exciting to see the circular economy maturing from its origins as a materials strategy, into something more profound for business and investment. It liberates businesses to become more sustainable as they continue to grow.” - Carol Lemmens - Global Advisory Services Leader, Arup

The report is timely – the real estate sector is facing significant disruption due to changing market trends. The construction industry is one of the most wasteful, polluting, and carbon intensive industries in the world.

However, a systemic shift towards the adoption of a circular economy is not without challenges. The report highlights that for the benefits of a transition to a circular economy to be realised at scale within the built environment, collaboration between decision makers, government institutions, businesses across value chains, and between public and private sectors is essential.