Decarbonizing Legacy Properties: Turning the Challenge into Opportunity

Legacy commercial buildings – whether older office towers, industrial spaces, or mixed-use developments – can often carry substantial barriers to meeting today’s ambitious decarbonization targets. Many were constructed with little regard for energy efficiency or environmental impact, and aging building systems experiencing operational drift can drive up energy waste and operating costs. 

But as regulations tighten and market expectations for sustainability intensify, real estate owners face a pivotal question: how to breathe new life into these assets in a way that aligns with carbon-reduction goals – while still ensuring returns?

Below, we explore how combining smart data analysis, strategic operational enhancements, and targeted capital investments can transform even the most inefficient buildings into high-performing, low-carbon assets. It’s a holistic approach that integrates financial, regulatory, and stakeholder considerations – all critical components of a successful net zero strategy. 

The Scale of the Challenge

More than 80% of the buildings that will be standing in 2050 have already been built, making our existing building stock key to our broader global net zero aspirations. As noted above, many of these properties were designed at a time when energy efficiency was less of a strategic priority, and before many of the significant technological and engineering advancements that have occurred in recent decades, resulting in structural inefficiencies ranging from outdated HVAC systems to subpar insulation and lighting. When multiplied across tens of thousands of buildings, the excess emissions resulting from these inefficiencies quickly compound. 

Simultaneously, emerging regulations – including Building Performance Standards (BPS) in major U.S. cities – are imposing escalating emissions targets on building owners. Investors and tenants alike are demanding greener portfolios, while landlords risk fines, reputational damage, and even obsolescence if they fail to modernize. 

In other words, the stakes – and the opportunities – have never been higher.

The Decarbonization Roadmap

Transforming an aging property into a lean, energy-efficient, low-carbon asset does not happen overnight. It requires a sequential, data-driven approach that includes:

1. Mapping out how and where energy is used
2. Optimizing operations to achieve low-cost quick wins
3. Identifying strategic, high-impact retrofits that reduce carbon emissions, ranging from efficiency upgrades to renewables to electrifying fossil fuel-powered equipment  
4. Leveraging available financial tools to unlock these upgrades, and 
5. Considering your portfolio's carbon footprint in the context of the grid 

In the sections below, we’ll delve into each phase in detail and provide practical examples of how these approaches may work for your organization and portfolio. 

1. Start with Data: Measure and Benchmark Performance

A successful decarbonization plan begins with an accurate baseline of current energy consumption and an inventory of carbon emissions. Without that foundation, property owners risk investing in upgrades that fail to address the biggest energy drains – or overlooking operational strategies that could have delivered quick, cost-effective wins.

In practice, the first step often involves conducting comprehensive energy audits, which may include walk-through inspections, occupant interviews, and the implementation of comprehensive data capture methods like smart metering, submetering, and advanced sensors. These tools allow for real-time monitoring of everything from whole-building consumption and energy intensity to HVAC runtime to lighting usage, helping operating teams identify patterns and opportunities that would otherwise remain hidden. Incorporating utility bill analysis is similarly critical: by comparing current usage against historical data from bills, owners and operators can better understand performance trends and the drivers behind higher utility costs – and prove the financial and energy impact of completed efficiency measures after the fact. 

Benchmarking – that is, comparing building performance against accepted standards such as ENERGY STAR ratings or relevant local BPS thresholds – can also provide context for how a building stacks up against regional or national averages, shedding further light on where you may have underperformers in your portfolio. Depending on your organization’s targets and reporting requirements, this process may also involve more granular carbon footprint assessments to inventory direct emissions (Scope 1) from energy generation or fuel combustion on-site, purchased electricity (Scope 2), and tenant-controlled and supply-chain factors (Scope 3). This will ensure that “hard-to-abate” areas are identified, which might include tenant plug loads or older equipment that requires phased replacement.

Whether you are focusing on energy usage or intensity, carbon emissions or intensity, or all of the above, the goal is to establish a clear, accurate baseline so that subsequent interventions can be measured and verified, a key consideration for demonstrating progress to investors and stakeholders and complying with Science-Based Targets and any other reporting requirements. 

2. Optimize Before Retrofitting

Once a clear baseline is established, the next step is to refine and optimize daily building operations. Many legacy properties can generate double-digit energy savings through improved operations and maintenance routines, AI-driven technology and controls, and tenant-focused engagement programs – long before investing in major retrofits.

For example, today’s advanced, AI-powered energy analytics platforms (like Noda) constantly analyze energy and equipment data to identify efficiency opportunities, and can even adjust HVAC, lighting, and other equipment to directly drive energy and cost savings (while taking into account indoor comfort metrics). 

For those earlier in their journeys, who may not have the organizational readiness for expanded automation, the value of real-time insights still cannot be overstated. Good energy management practices remain the workhorse of any real estate sustainability strategy. Uncovering inefficiencies – such as overlapping heating and cooling cycles or unnecessary after-hours lighting and equipment runs – and providing operators with actionable resolution steps can drive outsize impact when translated across a portfolio, with virtually no implementation costs. By taking a technology- and data-driven approach, owners can significantly curb energy use and emissions with minimal capital outlay. 

For those who are ready for more sophisticated strategies, the future of sustainable building operations is, in many ways, already here. From automated demand management – which leverages automation and pre-cooling to shift HVAC usage to times when demand fees are lowest and renewable availability is highest – to advanced FDD and predictive maintenance, which use machine learning algorithms to detect minuscule anomalies before they escalate into bigger problems – the tools exist on the market today to apply the power of AI to building operations. 

Finally, tenant engagement programs should not be overlooked as a key tool in the arsenal. Encouraging occupants to power off unused equipment, leverage natural daylight and blinds where applicable, and turn off lighting in unoccupied spaces – while also communicating the mutual value of these sustainability-focused behavioral changes – can significantly impact plug load and reinforce a building’s overall efficiency efforts.

The above operational strategies should form the bedrock of any decarbonization plan. Importantly, these initial gains can also help win stakeholder support for deeper, more capital-intensive measures later on. 

3. Prioritize High-Impact Retrofits from the Top Down

While operational measures can deliver quick payback, deeper carbon reductions frequently require physical upgrades to a building’s infrastructure – especially when moving toward a fully net zero profile. Legacy structures often lack robust building envelopes, rely on inefficient HVAC systems, or suffer from outdated lighting technology, all of which can add to a building’s carbon footprint. Addressing these challenges thus becomes crucial to an organization's broader decarbonization plan.

One of the most impactful retrofits is HVAC modernization. By replacing older chillers and boilers with high-efficiency heat pumps or installing variable frequency drives (VFDs) on fans and pumps, owners can realize substantial energy savings. Another prime target is lighting: a shift to LED fixtures can drive energy savings of up to 75% relative to conventional lighting systems, according to the EPA. Additionally, electrifying conventional heating equipment that relies on natural gas or fuel oil can measurably reduce emissions (by effectively converting Scope 1 emissions into a smaller share of Scope 2 emissions) – though it is important to be mindful of the grid mix (more on that below!)

Tackling the building envelope may also prove critical. Enhancing insulation, sealing air leaks, and installing high-performance windows with triple-pane glass or solar glazing can lower heating and cooling loads, translating directly into carbon reductions. These improvements can be especially transformative for older properties in variable or extreme climates, where thermal inefficiencies can be magnified seasonally.

Finally, onsite renewable energy options – like rooftop solar paired with battery storage – help offset grid electricity use, drive revenue when net metering programs are available, and provide added resilience during grid outages.

While it may be tempting to consider these upgrades on a site-by-site basis, it is important not to shy away from a programmatic, portfolio-wide approach. Per a recent study by ULI and the Rocky Mountain Institute, overall net zero retrofitting plans are more impactful when applied across an entire portfolio or campus, as a top-down scope can:

1. Unlock reduced costs and economies of scale through bulk purchasing
2. Enable sustainability teams to test strategies at a handful of pilot properties and then apply learnings at scale
3. Mitigate the risks of any single project failing by bundling diverse projects into a single investment strategy, and 
4. Help gain organizational buy-in for deep retrofits: combining more cost-effective projects with those with longer payback periods can bolster the financial case for deep retrofits that may not drive value in Year 1 (but which are ultimately necessary for long-term decarbonization)

Prioritization for these strategies is also essential. Owners may undertake a lifecycle cost analysis to weigh the financial implications of each potential upgrade. An individual set of actions for a given building might see operators executing low-cost improvements that provide immediate gains with little to no investment in Years 1–2, followed by major mechanical system replacements or building renovations in Years 3–5, mitigating disruptions to tenants and solidifying the business case while steadily ratcheting down emissions (and energy costs) over time. 

4. Leverage Incentives and Financing Options

As alluded to above, one of the most substantial hurdles to retrofitting legacy properties is cost – especially for large-scale projects like HVAC overhauls or onsite solar. In addition to some of the project management strategies noted above, a variety of financial tools also exist to offset capital expenditures and accelerate payback and ROI. 

Utility-run rebate programs and tax incentives offer direct benefits for installing high-efficiency equipment or renewable energy systems. Many utilities also have demand-side management programs that fund specific upgrades in exchange for peak-load reductions. PACE (Property Assessed Clean Energy) financing remains a powerful option as well, allowing owners to fund improvements through property tax assessments. This approach often features attractive interest rates and long repayment terms, aligning costs with energy savings.

For especially costly or complex upgrades, the rise of green bonds and ESG-linked loans further expands financing avenues. By tying interest rates or bond yields to verified emissions reductions, lenders and investors can align capital outlays with verified carbon-reducing projects, encouraging deeper, faster progress on decarbonization. Similarly, pursuing performance-based contracting by partnering with an Energy Service Company (ESCO) can lower project risk for an owner; the ESCO covers the upfront cost of upgrades, which must deliver verifiable energy and cost reductions, and is repaid through the savings. 

In many cases, blending multiple financing mechanisms is the key to success, especially for a regionally distributed portfolio where a wide variety of incentives and programs may exist. For instance, an owner might combine a local utility rebate with PACE financing and a small green bond issuance to fund a comprehensive retrofit package. By layering these options, owners can move forward with large-scale projects that might otherwise remain out of reach.

5. Consider The Grid Mix: Purchasing (and Timing) Clean Energy

Decarbonizing older buildings is not just about reducing on-site energy usage; it also involves paying close attention to where that energy comes from. Even a state-of-the-art, highly efficient property can carry a significant carbon footprint if it sources electricity from a region heavily reliant on coal or natural gas. Conversely, buildings in areas with cleaner fuel mixes – such as wind, solar, or hydro – can see immediate carbon reductions by virtue of drawing on greener power from the grid. 

One approach to tapping into cleaner sources is to explore green tariffs and collaborations with local utilities that offer premium programs for renewable power. Under these arrangements, property owners can opt into specialized rate structures that supply a certain percentage of electricity from wind or solar farms. While this can entail slightly higher costs compared to standard grid rates, it also guarantees lower Scope 2 emissions. Purchasing Renewable Energy Certificates (RECs) is another option, especially for buildings not yet ready or able to install on-site renewables. Although RECs do not directly reduce on-site consumption, they channel funds toward renewable energy projects elsewhere, demonstrating a commitment to responsible energy sourcing.

Larger portfolios might consider Power Purchase Agreements (PPAs) for an even more direct line to renewables. By entering into a contract with a solar or wind project developer or supplier, owners can lock in long-term power prices while reducing reliance on fossil fuels. This type of agreement offers both cost predictability and lower carbon intensity, which can be especially appealing in markets with volatile electricity costs or ambitious climate goals. 

Beyond these procurement strategies, building operators can further optimize their usage patterns by scheduling energy-intensive activities – like pre-cooling during hot summer months or charging electric vehicles – when local grid emissions are lowest. In many regions, midday hours align with peak renewable production, enabling properties to effectively harness cleaner electricity. If these strategies are of interest, get in touch with Noda to learn more about how our automated demand management solution can help you reduce fees, maximize renewable availability, and reduce strain on the grid. 

Overall, purchasing clean energy and timing consumption around low-carbon periods can yield significant reductions in a building’s total emissions profile. While operational improvements and on-site upgrades cut direct energy use, evaluating your buildings' relationship with the broader grid will further diminish your portfolio's overall carbon impact. By staying attuned to evolving electricity markets, incentives, and technology solutions that automate load shifting, property owners can make strides on their decarbonization plans without compromising tenant comfort or operational performance.

Recap

Decarbonizing legacy properties is no small task, but can be broken down into manageable stages that align stakeholders, maximize short-term wins, and ensure a successful plan: 

• First, measure and benchmark energy and emissions to develop a solid performance baseline.
• Next, harvest your low-hanging fruit: drive low-cost quick wins through technology, operational improvements, and tenant engagement. 
• Then, invest in targeted retrofits and upgrades to address the building’s most carbon-intensive systems and infrastructure. 
• Throughout these steps, financing mechanisms – from rebates and incentives to green bonds – can help overcome cost barriers. 
• Finally, contextual awareness of the grid mix and undertaking strategies to prioritize or directly procure clean energy can further impact your portfolio’s carbon footprint.

While each step has its own challenges, this iterative, data-driven roadmap creates a practical way forward for legacy properties. And as market forces and policies increasingly reward sustainability leadership, such a practical way forward will be key: the decision to decarbonize is already evolving from a nice-to-have initiative into a critical competitive advantage. By taking action now, owners can ensure their assets stay relevant, resilient, and profitable for years to come.

About Noda

Noda is a data and analytics company on a mission to make every building smarter, more efficient, and more sustainable. Recently ranked in the top 10 tech companies leading the charge on climate action, its AI-powered suite of products surface unique insights that empower real estate teams to reduce costs, decrease time spent on routine work, and find and act on opportunities to save energy and carbon. Discover how Noda's solutions can unlock the potential of your assets and accelerate the transition to net zero. Visit us at noda.ai to learn more.