Real estate decarbonization is moving to the building level

A review of recent sustainability reports suggests that real estate owners have entered a more mature phase of decarbonization. Large REITs and institutional landlords are beginning to move beyond portfolio-wide climate targets toward asset-level decarbonization planning, compliance modeling and capital planning.

“Many REITs and large owners have already set high-level goals,” said David Maguire, global head of product for sustainability solutions at the commercial real estate services and investments firm CBRE, in an email. “Now they’re moving into implementation, integrating decarbonization targets with capex planning at the asset level.”

New use cases

Investor expectations, occupier goals, disclosure requirements and green financing frameworks are helping push planning down to individual buildings, as metering technologies and BMS software grow more sophisticated. And owners are finding new ways to manage and analyze these larger and higher-quality data streams to drive action at the building level.

“The business case for each intervention is tied not just to risk management and protecting asset worth, but also to increasing net operating income and exit value,” Maguire said.

GRESB — which includes a foundation that sets standards for evaluating and benchmarking real-asset performance and a benefit corporation that administers the assessments — has also observed movement toward granularity. 

“Previously, managers drew their targets at the portfolio level and worked on implementing them asset by asset,” said Victor Fonseca, senior associate for real estate at GRESB. “Now we’re seeing demand from investors for this to be done bottom-up.”

The decarbonization plan for each asset should include an emissions-reduction strategy, timebound milestones and financial grounding, he added. 

In 2020, with investors calling for more granularity, GRESB began collecting data at the asset level, rather than just the portfolio level. And in 2024 it began scoring asset-level data.

Investor demand, then regulation

While regulation reinforces the push for asset-level data, the demand for deeper detail often starts elsewhere.

“Regulation is typically one step behind industry leaders,” said Fonseca. “Institutional investors drive regulation, and regulation drives the masses.” 

Those industry leaders include REITs looking to differentiate and attract investment — especially from sophisticated global investors with capital tied to long time horizons, who are attentive to long-term carbon risks and the physical threats of climate change.

Hundreds of individual asset plans

Ventas, an S&P 500 REIT with a diversified healthcare portfolio, has drafted individual asset-level decarbonization plans for the more than 900 properties within its operational control, outlining actions across energy efficiency, renewable energy and electrification and refrigerant management. 

Likewise, logistics real estate giant Prologis is developing asset-level decarbonization plans for each property in its operating portfolio. Its net-zero roadmaps coordinate capital upgrades with regulatory timelines, customer needs and projected utility decarbonization.

Vornado Realty Trust, an owner and manager of office and retail properties, finished designing a building decarbonization tool in 2024 for modeling capital energy efficiency projects.  

The company said it has institutionalized annual asset-level sustainability meetings, and its sustainability team is collaborating with each building’s engineering and facilities teams on energy use reduction.

Asset-level decarbonization remains out of reach for some owners, said Maguire. While some have robust data management systems, many do not — and gaps are common. A portfolio may have superb mechanical asset condition records but little reliable tenant utility data, undermining asset-level modeling aspirations. 

Still, though not every owner is ready for building-by-building planning, the pull toward more fine-grained decarbonization planning and action is evident — and growing.