The 1950s (generally speaking) marked the start of a ‘throw away’ culture that has been picking up pace ever since. Each year, we mine more natural resources, make more plastics, send more waste to landfill and push the boundaries of sustainable water extraction. It’s a linear model termed in popular circles ‘take, make, use, dispose’ – and it’s rapidly falling out of favour. 

As natural resources dwindle and become harder to access, landfill reaches capacity and the effects of ecosystem pollution become more pronounced, there’s increasing pressure to transform today’s disposable, linear economy into a circular one. A ‘take, make, use, and reuse’ economy, if you will. 

The circular economy and real estate

The World Economic Forum estimates that a circular economy in general could remove 70% of CO2 emissions in Europe by 2030. That’s a particularly big deal for the building sector, which accounts for 36% of EU CO2 emissions and is under increasing pressure to reduce carbon output as 2050’s net zero targets get closer.

Circular initiatives could well be the answer. Every year, the built environment (that’s everything we build, from housing to infrastructure) uses nearly half of all materials extracted around the world. A circular approach would dramatically reduce the demand for virgin products like steel, aluminium and cement, which themselves have highly carbon intensive supply chains. It is estimated that by 2050 circular principles could reduce the CO2 emissions from building materials globally by as much as 38%. 

That reduced materials demand is a vital point, potentially even more so than the  environmental benefit – at least in the short term. Building and construction is currently being hit hard by volatile prices and materials shortages, which are the result of a myriad of issues compounded by increasing demand and dwindling resources; a problem we can’t solve without circularity. 

The economic value of a circular economy 

Now, it’s been awhile (eight years) since anyone crunched the numbers, but McKinsey put the total cost of today’s ‘take, make, use and dispose’ approach at €7.2 trillion a year – that’s just for Europe. Around 25% of those costs are attributed to resources.  

That means the savings on materials costs generated by a circular economy could be worth as much as €1.8trillion to the EU. The World Economic forum reckons the global resource savings from circularity could be as much as $4.5 trillion by 2030, and that’s before we’ve even started to consider the value added by associated factors, like job growth and innovation. 

When it comes to real estate, McKinsey estimated that circular initiatives – specifically modular processes (where products are intentionally manufactured to be easy to repair, reuse or reassemble) – could cut construction costs in half compared to a traditional, linear approach. For developers and retail investors, that’s an interesting proposition. 

Opportunities for real estate investors

Property development is at a crossroads. With materials costs so volatile and lead times growing by the day, the historic approach of ‘design, bid, build’ doesn’t work. Delays are commonplace, which leaves development projects liable to skyrocketing costs, refinancing and delayed exits. A circular economy has the potential to mitigate a lot of these issues – and create a number of innovative investment opportunities in the process.

A 2020 report by sustainable development collective ARUP (as an aside, this is well worth a read) modelled a number of different circular real estate investment scenarios. It found that circular principles could deliver improved financial performance for investors. Yet, it noted that all require an overhaul of the value chain to work, with new entrants, innovators and relationships needed to support broader changes. 

That’s something we’re pretty keen on too here at Hedgehog. Opening up previously inaccessible real estate opportunities to individual investors is our mission. Our development partner National Resources remediates and repurposes environmentally contaminated sites, so Hedgehog investors gain exposure to sustainable property development opportunities and in doing so increase funding for an innovative developer embracing sustainable initiatives. 

This approach, and others like it, is a critical first step in making a circular economy the new normal. Meeting the UN’s development goals by 2030 as well as 2050 net zero emissions targets will take a $6.9trn investment per year for the next 25 years – but the shortfall in funding currently stretches into the trillions of dollars. This creates a unique opportunity for individual investors to help address this funding gap and drive meaningful change with their real estate investments. 

Making an impact

The circular economy has the potential to help mitigate the impact of real estate, a carbon-intensive, high-waste sector. But moving from a traditional, linear approach to a more sustainable ‘take, make, use, and reuse’ model is no small undertaking – the industry needs to be incentivised. If investors and developers start to prioritise that change, and demonstrate an ability to realise more value from real estate assets in the process, then the building industry will follow suit. Together, we’ll be able to address materials volatility and minimise costs, improving real estate investment returns while increasing sustainability and reducing carbon emissions. 



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