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Blogs 4 oct 2023

Sustainable construction: a trend that also pays off monetarily

The future starts now. Therefore, there is no way around sustainable building methods. In Germany, in the construction of its new district archive, the district of Viersen tested the circular economy concept, thus striving for the longest possible lifespan of products and raw materials.

In practical terms, this means avoiding waste by reusing and repairing existing products, or wherever this is not possible, disassemble them into their raw materials for the purpose of recycling. This turned out a complete success, as far as the author is concerned. Because the exciting thing about it, according to the author, is that today’s circularly built properties are already achieving higher prices in rentals and sales than conventionally constructed buildings. Therefore, despite its higher initial construction costs, the cradle-to-cradle approach is one that is worthwhile — in terms of climate protection as well as from a monetary point of view. 

There will always be construction going on — but resource scarcity and rising raw material and energy prices, along with unattractive financing options, are currently dampening the drive for new construction and conversion in Germany. 

In addition, for many of the actors in this field, from both the private and public sector, concerns about increasing sustainability requirements are making them more cautious. 

One thing is clear, however: anyone involved in construction today needs to move with the times rather than rely on the old. Recycling plays a decisive role in this respect. This is already happening in other sectors of the economy, such as the textile industry which has been reusing fibres and materials for years, whereas the real estate sector is still lagging far behind. 

The new Viersen district archive and a decree by the state government of North Rhine-Westphalia show how things can be done differently, including the role of transparency, and the financial advantages of sustainability in construction. 

A look at Germany’s nationwide CO2 balance reveals that the construction sector is not only responsible for about one third of the total energy consumption, but also for 40% of greenhouse gas emissions. And that is not all; in 2020, construction and demolition waste accounted for around 229.4 million tonnes (i.e. more than half (55.4%)) of the waste generated nationwide. In order to achieve both the ambitious climate goals of the federal government and climate neutrality by 2045, a new, more sustainable way of dealing with raw materials is needed. 

Cradle-to-Cradle designs are essential 

To achieve these goals, a true circular economy, which is based on intelligent recovery and recycling, offers a suitable concept. The idea behind it, called cradle to cradle, is easy to explain: all materials should be used in such a way that they can be recovered at the end of a product or building’s life cycle and returned to the material cycle. Central elements in this concept are pollutants, product purity and disassemblage options. In this way, natural resource reserves are conserved, and the amount of grey energy and its related CO2 emissions will be sustainably reduced. 

The crucial point, especially for developers and operators, is that circularly built properties when rented or sold already are fetching higher prices than conventionally constructed buildings. In addition, some banks are already applying circular quality as a criterion for determining interest rates on loans. And this is just the beginning. So, to ensure future marketability and competitiveness, sustainable building methods are essential. 

Viersen District Archive: Pilot project in circular construction 

The example in the district of Viersen in North Rhine-Westphalia shows particularly well how circular construction pays off, despite the higher initial construction costs. The district archive was completed in 2022 according to the circular economy concept. In 2016, the idea for the project was first roughly outlined and quantified at around 8.9 million euros. At that time, however, there was neither a planning draft nor a definite building plot. After winning an architectural competition in 2017 and the subsequent commissioning of the project, the architect’s draft included a cost calculation from 2019 of 11.6 million euros. 

By 2022, the price of steel bars had risen by around 40%, reinforcing steel mesh by 38% and flat glass by 49% — not to mention the higher energy prices. In addition, it was discovered during the planning phase that around 7% more space would be needed for implementation. In short, the final construction costs for the large-scale project came to 16.6 million euros, 7.7 million above the original budget of 2016. 

What at first glance does not seem very worthwhile is surprising on closer inspection, as this ‘budget gap’ was closed by applying circular construction. The building was consistently realised according to the principles of circular value creation and is, therefore, unique in Germany. For example, demolition bricks were reused and the wooden and concrete components that were applied all have screw connections, which means they can be deconstructed without leaving any residue. 

On the energy supply side, for its new archive, the district of Viersen relies on solar collectors, photovoltaic systems as well as a heat pump and an ice storage tank. A sophisticated ventilation system ensures a healthy indoor climate and pleasant indoor temperatures. The goal has been to make the building as self-sufficient as possible. On a neighbouring plot, a planned special school and road traffic office will be run without the use of fossil fuels as well and will also be built according to the principles of circular value creation. 

The construction costs for all this may seem very high at 16.6 million euros, but looking at the life cycle of the building puts this in perspective. Based on the planning so far and the information from Madaster (the material cadastre for Germany), the project has an expected material or natural resource value of around 1.2 million euros. Furthermore, in relation to its useful life, 3.4 million euros can be saved on energy and 2.3 million euros on maintenance, compared to properties built according to conventional construction methods. 

In addition, around 140,000 euros will be saved on CO2 tax. If these amounts are added together, the actual costs for the new district archive (i.e. around 7 million euros) are even lower than the original total estimate from 2016. The district archive in Viersen, thus, is the first project in Germany for which it was possible to embed raw material values in the budget and for which the value of the property is not solely determined by its land or rent value. With the plans for the Förderzentrum West and the road traffic office (Straßenverkehrsamt), two more circular buildings will be built, with a combined raw material value of 14.1 million euros. 

The calculation, based on the example of the Viersen district archive, shows how the additional expenditure on planning and construction is put into perspective over the period of use. In the future, the government of North Rhine-Westphalia will support circular construction from the point of view of climate protection and resource conservation as well as balance-sheet advantages. 

It is, for example, common practice for municipalities and cities to depreciate the buildings on their balance sheet in accordance with the useful lifespan of these properties. According to the traditional, linear depreciation methods, sizeable buildings used to be depreciated over the course of 40 to 60 years down to a value of zero or one euro, according to the useful life table of the state of North Rhine-Westphalia. This is now changing. With the decree on new municipal financial management in which circular value creation and cradle-to-cradle designs are also taken into account (‘Neues Kommunales Finanzmanagement: Bilanzierung von Vermögensgegenständen des Anlagevermögens unter Berücksichtigung der zirkulären Wertschöpfung/Cradle-to-Cradle’), truly circular buildings can now be depreciated down to their salvage value, whereby the determined amount must be documented. 

‘Transparency and environmental data are needed to successfully build according to the concept of circular value creation’ 

The acquisition or renovation costs incurred in the construction of a building are reduced by its salvage value. The remaining amount then continues to be depreciated as usual, over the useful life. Thus, on the one hand, the probable material value of the property remains on the balance sheet as a permanent asset, while, on the other, the lower capitalisation amount leads to a reduced annual depreciation. In the end, sustainable construction and renovation not only protect the environment and preserve resources, but also relieve the burden on municipal balance sheets, in the form of lower depreciation expenses, which ultimately makes it easier to balance the budget. 

True circular economy needs transparency 

However, successful construction according to the concept of circular value creation, first and foremost requires transparency and environmental data. If a building is designed as a repository of raw materials, all the materials and components used must be documented right from the start. Madaster offers a platform for this purpose that is directly linked to international commodity exchanges, so that the present-day material value of a property can be viewed at any time. At the push of a button, the building design can be uploaded as a BIM model or Excel spreadsheet during the planning phase and checked with regard to circular economy aspects, such as material selection and use. During construction, the digital building profile is then filled with all property-specific information, down to the last screw, brick and steel girder, including their exact location. 

Madaster’s digital material cadastre then supplements relevant manufacturing data and can provide information about the current material value of a property, at any point in time, thanks to direct networking with international commodity exchanges. The environmental data from EPEA are fully integrated and linked. This results in a separate building material passport, with owners receiving information about the recyclability, CO2 footprint and composition of their property. The platform also provides detailed information on the quantity, weight, toxicity and recyclability of all individual materials, as well as their current daily salvage value minus the potential deconstruction costs. This not only creates transparency, but also forms the basis for future requirements. 

There is no way around sustainable construction methods. In order to lower energy and maintenance costs during a building’s period of use and the financial advantages of accounting for its salvage value as an asset, circular construction makes absolute sense, not only ecologically, but now also economically. The increasing requirements in the context of ESG and climate protection are already influencing the value of a property today. For example, higher prices are achieved for both rental and sales properties, if they were built with circularity in mind. In addition, a high degree of sustainability will also increase the level of acceptance of any building in its environment. 

Author: Dr Patrick Bergmann, General manager, Madaster Germany GmbH, Berlin 


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