The low-carbon case for retrofit has become so strong that economic arguments for new-build may no longer secure support, suggests Simon Rawlinson of Arcadis.

Simon Rawlinson New

I was recently asked to provide a keynote speech at a RICS debate: retrofit first or retrofit only? The organisers clearly set the “first versus only” topic to spark a fiery debate, but it did not quite work out like that – mainly because no one would explicitly take the retrofit only position. It’s just a bit too extreme.

But could we now end up in that position by default? Many of our speakers highlighted the overwhelming climate case for retrofit, particularly with respect to resource depletion.

They pointed out that many of the wider environmental impacts of construction, such as excessive mineral extraction, waste production and so on, are not directly paid for as part of the development process. If the full cost of these externalities was paid, would new-build projects be viable? Would so many go ahead?

Indirectly, what we were debating was whether there remains an economic and social case for new-build in the face of the challenge of the climate emergency.

Two days later, the High Court published its decision on the M&S Oxford Street case, ruling in favour of the retail chain and their plans for a new-build redevelopment. It is worth noting that the plans were originally supported by Westminster City Council and the Greater London Authority, albeit those approvals were given in late 2021 – a very long time ago in terms of carbon policy and politics.

The secretary of state Michael Gove could appeal, but probably has other things on his mind

Coincidentally, the council’s draft retrofit-first policy, which also introduces embodied carbon targets, was published for consultation on the same day, 1 March 2024.

M&S and their team will be no doubt be very satisfied with the outcome. The secretary of state Michael Gove could appeal, but probably has other things on his mind.

While supporters of the freedom to demolish and build might argue that the findings of the court are a reversal away from the policy of retrofit first, I am much less sure. Policy has moved on and it is now much harder to justify new-build in central London. However, for the sake of regeneration and levelling up in less successful areas, a flexible approach still remains very important.

Turning back to Oxford Street, interestingly neither the core arguments underpinning Gove’s original refusal nor the latest court case actually focused on the sustainability impacts of the development. Most of the case presented against development at appeal centred on the heritage aspects, and M&S failed to overturn these in their judicial review.

Where M&S did win was in connection with claims that Gove had not adequately explained his dismissal of the economic case for approval. This case held that the western end of Oxford Street would suffer economic harm if the new-build option was not built. Given that M&S intended to close the store entirely without a new-build, these concerns had good foundations.

Future new-build schemes in many locations face a much higher hurdle than M&S did to demonstrate that they are an appropriate solution

One of the reasons why carbon considerations played less of a role in the original appeal was that no retrofit or embodied carbon policy was in place in 2023 when the inspection took place. Now that draft policies have been published, this argument no longer applies.

In development, timing is everything. Looking forward, future new-build schemes in many locations face a much higher hurdle than M&S did to demonstrate that they are an appropriate solution.

Retrofit makes great sense – when the conditions are right, and when the bones of the building are good. Two other redundant Oxford Street department stores for example, DH Evans and Debenhams, are being redeveloped using the existing structure and envelope and will be a fabulous addition to the street, combining distinctive retained architecture with cutting-edge uses. However, trade-offs often apply, as was the case with the M&S site, so not all development outcomes will be so successful.

The downside scenario for Westminster’s new policy is therefore whether it contributes to a reduction in the volume of development in the borough, even as it promotes a shift towards more sustainable forms of construction. Westminster is competing for development capital after all. Effective application of the policy will be crucial.

Ironically, the simultaneous introduction of the borough’s £880 per tonne carbon offset charge for operational carbon might discourage deep retrofits that trigger a planning consent. Reliance on the performance of elements of existing fabric rather than state-of-the-art new-build might result in higher operational emissions that attract a higher offset charge that in turn affect viability.

This demonstrates some of the complexities to be met in implementation. Hopefully, it is a policy wrinkle that can be readily addressed through thoughtful implementation.

Away from city centres and in locations where values are lower, I have a concern that sub-optimal retrofit solutions will be brought forward

Developers in valuable, city-centre locations will be able to access all the resources that they need to operate effectively in the retrofit-first environment, either hiring talented design teams to deliver great re-use options or talented planning teams to make the case for the new-build option. However, away from city centres and in locations where values are lower, I have a concern that sub-optimal retrofit solutions will be brought forward.

Expanded permitted development rights (PDR) that will offer greater flexibility with respect to layout and daylighting could create this opportunity, with otherwise redundant shopping centres, department stores and other redundant commercial buildings being repurposed to address shortages in housing and other much-needed social space. Could the unintended outcome of a planet-friendly retrofit-first policy be the delivery of sub-optimal buildings and neighbourhoods?

In the light of the M&S judicial review, the economic case for new-build options remains on the table for now. However, as more authorities adopt retrofit first as a planning policy, then this development model will become harder to justify.

That is potentially a great outcome for the planet, but perhaps not the best for thriving cities. In applying new planet-friendly policies, we must ensure that the social and economic outcomes are properly considered too, so that places and communities fully benefit from future clean investment in our cities.

Simon Rawlinson is a partner at Arcadis