Guide to energy-efficient renovation

Renovation backlog in many existing buildings

The need for energy-efficient retrofits in Germany’s residential building stock remains one of the key challenges facing the real estate industry. Industry estimates show that a significant portion of the heating systems in apartment buildings no longer meet current standards.

In addition to heating systems alone, the renovation backlog often extends to the building envelope, inadequate insulation, and outdated windows. In condominium associations (WEG) and rental properties in particular, complex coordination processes and high investment costs often delay necessary measures. However, given the threat of value depreciation due to poor energy efficiency ratings, the pressure on owners of existing properties to take action is becoming increasingly urgent.

What is the difference between renovation and modernization?

The focus of renovation is on visual improvements to a property, such as refreshing the space with new colors, implementing personal design preferences, or – in commercial units within residential and mixed-use buildings – making minor changes to meet organizational requirements. Damage does not necessarily have to be present for this to be considered renovation. From a purely legal standpoint, there are no requirements for renovations regarding modern standards for thermal and moisture protection, sound insulation, or fire protection. As a rule, renovations are carried out on both the exterior and interior surfaces of buildings.

Modernization refers to a project that, in addition to restoring a building to a visually satisfactory condition, achieves a significant improvement in living quality. This improvement should meet current energy efficiency standards. This includes, for example, thermal insulation as well as soundproofing, moisture protection, and fire protection. Waterproofing and insulating basements and roofs also fall under this category.

What makes a refurbishment an energy-efficient refurbishment?

Refurbishment is necessary when something is defective or damaged – for example, when pipes need to be replaced or the roof or facade needs to be repaired. The goal is to ensure the building’s structural integrity, repair damage, and preserve the property’s value over the long term. In practice, modernization and renovation often overlap.

Energy-efficient refurbishment goes a step further and focuses specifically on a building’s energy efficiency. Typical measures include insulating exterior walls, replacing windows, or modernizing the heating system. The goal is to lower energy consumption, reduce CO₂ emissions, and meet legal requirements and eligibility criteria for subsidies.

How property owners benefit from energy-efficient refurbishment

The greatest potential for energy savings lies in the existing housing stock. Older, unrenovated apartment buildings often require about three to five times as much energy for heating and hot water as new buildings. How quickly an energy-efficiency renovation pays off financially depends on the property, financing, subsidies, tenant composition, and the legal framework.

However, if energy-efficiency renovations are delayed for too long, this can become an obstacle to renting out the property. This occurs when the total rent, including operating costs, is no longer competitive due to rising energy prices. As a result, the owner would have to accept rent reductions or longer periods of vacancy.

Energy-efficiency retrofit projects require thorough planning and typically involve significant investments, which often take ten or more years to pay off. This aspect therefore frequently acts as a deterrent. On the other hand, a professionally executed energy-efficiency retrofit undoubtedly increases the property’s value. It is foreseeable that a property’s energy efficiency will become an increasingly critical factor in determining its value in the future.

Do smaller measures also pay off?

Older properties often require substantial investments in building services engineering and thermal insulation in order to keep operating costs – especially energy costs – within reasonable limits. In view of today’s steadily rising energy prices and the current funding measures, it is therefore essential to carefully assess which energy-efficient renovations are worthwhile from an owner’s perspective.

In general, however, it can be said that even smaller modernization measures usually pay off. In any case, it is worthwhile to carefully look for optimal improvements within the scope of energy-efficient renovation based on the respective current energy and structural condition of the property. Ideally, you should seek the assistance of an expert assessor.

Overview of the benefits of energy-efficient refurbishment

An energy-efficient refurbishment can significantly reduce the operating costs of an apartment building or a mixed-use residential and commercial building while also increasing the property’s value. For owners, it is therefore not only a contribution to climate protection but also a financially sound investment. The benefits at a glance:

• Reduction in heating and operating costs

• Increase in property value

• Improved rentability and market position

• Greater comfort and usability

• Reduction in CO₂ emissions

• Opportunity to take advantage of subsidies and government financial assistance