Leveraging models based on the circular economy can help real estate b

The circular economy is a popular buzzword, but what does it mean? To put it simply, it represents an organized way in which waste is eliminated and the continual use of resources is promoted. With climate change front and center in daily headlines, change is necessary as far as real estate is concerned. The industry is no stranger to sustainability, but it has yet to embrace the circular economy. By adopting business models based on the circular economy, companies can benefit in more ways than one. Advantages include but are not limited to financial gains, reducing the footprint of their resources, and implementing the decarbonization project.

The construction sector is wasteful, polluting, and carbon-intensive

Most commonly described as the ultimate paradigm shift, the circular economy brings about a healthy planet, not to mention high rates of growth. it implies a radically different approach from the present one where tremendous amounts of resources are deployed. Global waste generation stands to grow by 70% unless urgent action is taken. The commercial real estate industry, in particular, generates significant amounts of waste via construction and operational phases. A shift towards the adoption of the circular economy goes a long way in terms of acting environmentally and socially. Nevertheless, it is not enough to replace materials with green alternatives and recycle more. A change in terms of mindset is paramount.

The focus needs to be on enhancing the bottom line, saving the planet, and attracting millennial workers. Sustainability implies change beyond the operational phase, meaning that new business models need to be taken into account. Models based on the circular economy have turned out to be successful in other sectors. Change is already taking place due to the introduction of the concept of cradle-to-cradle, which involves designing products and systems in such a way that they can be regenerated. The real estate industry must protect ecosystems and nature’s biological metabolism. Beginning with design and ending with construction, real estate companies are exploring the sustainable theme and looking into ways in which they can place the circular economy at the core of processes.

The circular economy as a business strategy

Within the circular economy model, recycling is not an option, but an essential part of business. Companies like Mil-tek now offer large assortments of waste balers, each industrial machine has its own unique instructions. Given the fast-growing waste streams resulting from economic development and urbanization, it is not hard to understand the necessity of recycling. Owing to technological breakthroughs, particularly digital in nature, there is a significant opportunity for real estate businesses to stimulate competitive advantage. It needs to be stressed that technologies play an important role in eliminating some of the constraints linked to the circular economy allowing them to keep materials and products and circulation longer.

Front-running companies are already pursuing circular economy strategies demonstrating not only that it is possible, but also that it can offer a competitive advantage. The circular economy in real estate is moving onward. Long-established sectors of materials and machinery have embraced innovation, resorting to materials that have the power to contribute to positive human health and do not affect the environment. What is more, they do not say no to deploying recycled concrete to respect the requirements of a sustainable application. The pressure on the landfills continues to mount, which is why it is necessary to diversify C&D materials. Recycled concrete is a cheaper aggregate, not to mention that it reduces the need for gravel mining.

The concept of “building to last” is continually adapted to the needs of society and enables the real estate industry to move away from the traditional scheme to address the issues of versatility and reversibility. It is more important than ever to realize the value that can be derived from the circular economy and create a better place for people to live. Certain principles can be applied to real estate, leading to better returns in the long-run. The aim is to deliver more flexible, adaptable, and deconstructable buildings. If the buildings are in line with consumers’ expectations, who demonstrate respect for the environment, it is possible to increase the profit margin.

A few examples of real estate business models

There are several business models that real estate companies can take advantage of to enhance resource productivity and eliminate expenditure. Let us take a close look at three of them.

Flexible spaces

Companies that own impressive amounts of real estate need to take account of the fact that the unused space in buildings generates carbon dioxide emissions. Offices are paid for but left unused or vacant. Practically, money is being spent on electricity, heating and cooling, etc. for spaces that are not being used. Flexible spaces, such as co-working spaces represent the solution. Many say that the future of real estate lies in flexible spaces, the trend towards workplace mobility starting during the pandemic and still going strong.

Residual value

By residual value, it is understood the value of a fixed asset at the end of its useful life. Via the residual value business model, individuals can create negotiable forward contracts relating to the quantity of building materials used during deconstruction. These contracts can be exchanged during the construction process or while the building can be still used. The result is that the reuse of building materials becomes feasible. Reusing materials saves landfill space, reduces the need for new material to be designed, and helps meet green building standards.

Sustainable procurement

Sustainable procurement in the context of real estate is based on the idea of purchasing services, not products. Build to rent development, which is making headlines right now, enables energy conservation in buildings. The real estate developer applies their know-how to create a collective space that comes with sustainability. Services are “right-sourced” by people who are experienced in terms of business functionality. Procurement is undergoing change, which translates into the fact that real estate companies need to carefully manage supplier relationships and make solid purchasing decisions.