In late 2024, ULI’s Randall Lewis Center for Sustainability in Real Estate held roundtable discussions with members of the ULI Americas Sustainable Development Council (SDC), the ULI Asia Pacific (APAC) Net Zero Council, and the ULI Europe Sustainability Council to inform an outlook for 2025.
During the discussions, members addressed sustainability topics and issues that are on the rise, why they matter, and what actions the industry should pursue in the future. Based on expert knowledge shared by those who attended, ULI identified five issues that will shape real estate decision-making in the coming months:
- Simplifying goals and prioritizing decarbonization
- Emphasizing the impact of building materials
- Focusing on occupiers—demand, health, and well-being
- Sourcing and storing green power
- Investing in resilience
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Key issues in sustainability
Amid an extended streak of exceptionally high monthly global mean temperature, the World Meteorological Organization reported that 2024 was poised to be the hottest year on record. These trends lend urgency to keeping climate action on track. Although the political backdrop to climate action in 2025 may be uncertain, sustainability leaders predict that the real estate industry will not be derailed.
The bottom-line message from the real estate industry is that we must move forward. To keep stakeholders engaged and innovation alive, leading ULI members say that now is the time to streamline action and push toward decarbonization and resilience to improve asset values and rental income, and to benefit communities.
Simplifying goals and prioritizing decarbonization
Real estate professionals agree that prioritization is vital to maintain momentum in 2025. “Actionability and practical solutions are key,” said London-based Daniel Chang, managing director, head of Europe ESG at developer Hines. Many see grass-roots action—action at the asset-level—and action at the subnational level as most effective. Sustainability leaders want to spend less time on compliance and more time on educating tenants and building asset managers.
Chungha Cha, board member at Seoul-based real estate finance company Koramco, emphasized the importance of keeping things simple and taking actionable steps, such as developing an ESG committee to define priorities, focusing on measuring energy per square meter per year (EUI), and improving data collection. “EUI is the one number [kWh/m2 per annum] to quantify the total energy consumption of a building. It shows very quickly whether the building is an energy hog, wasting energy and money unnecessarily, or whether it is doing really well in this respect.” Chungha noted positive outcomes from Koramco’s work with EUI, reporting savings of $2 million in 2023 versus in 2022 on energy bills. This amount equates to an increase in operating income of $2 million and an increase in asset valuation of $45 million.
Hong Kong–based John Haffner, deputy director for sustainability at Hang Lung Properties, is equally interested in asset-level EUI benchmarking for internal purposes, because institutional investors are asking for it. “If we have credible benchmarking, it helps us internally, to show how assets are performing compared to others, and makes the business case for investors. The challenge is to get good data. We are going to work on that.”
Due to the challenging economic landscape, participants noted that sustainability is not always prioritized within real estate companies.
Munich-based Stephan Deurer, chief financial officer at developer ECO Residential, said: “Costs did not just go through the roof—they went close to the moon. This means affordability, in most cases, is also off the scale and is why lots of projects won’t take off.” For decarbonization to succeed, factors such as affordability will have to be considered, too.
Milan-based Stefano Corbella, sustainability officer at Italian investment, development, and management company Coima, noted that “The cost increases mean the return on investment is not attractive to certain investors. As a result, capital allocations have decreased dramatically.” He said Coima needed to find ways to decrease costs, specifically on materials.
Emphasizing the impact of building materials
Building materials are increasingly becoming a priority for real estate leaders seeking to reduce the environmental and human-health impact of their buildings. The data tell a clear story: building materials contribute about 11 percent of global carbon emissions every year and often contain chemicals and other substances that harm people and ecosystems.
Embodied carbon is quickly gaining attention in the net zero transition. Clemens Brenninkmeijer, head of sustainability at Netherlands-based asset manager Redevco, said that alongside efforts to tackle operational emissions and improve social impact, the firm would make a “bigger push” toward reducing embodied carbon in its development and retrofit activities.
Albert Chan, director of development planning and design and chief sustainability officer at Hong Kong–listed property company Shui On Land, appreciates this impetus and intends to increase his firm’s understanding of the embodied carbon in its construction materials.
Haffner, one of Chan’s fellow APAC participants, reported that Hang Lung’s efforts to decarbonize its buildings had “taken a significant step forward” in 2024. Hang Lung is using low carbon emissions steel for all above-ground structural plates and reinforcing bars in its Pavilion Extension at the Plaza 66 mall in Shanghai. It is the first commercial real estate project in mainland China to incorporate low carbon emissions steel. Sourced from Shanghai-based Baoshan Iron & Steel, the material has 35 percent less embodied carbon compared with conventional steel alternatives. Haffner said the initiative would be useful as a case study to show how to incorporate this type of steel into the procurement process.
Judi Schweitzer, president, and chief sustainability adviser at Schweitzer & Associates, explained that this approach has now been codified in the state of California: effective July 1, 2024, all new buildings with a combined floor area of 100,000 square feet or greater must either conduct a cradle-to-grave whole-building life cycle assessment (LCA) performed in accordance with ISO 14040 and ISO 14044 (excluding operational energy), demonstrating a 10 percent reduction in the Global Warming Potential (GWP) as compared to a reference baseline building of similar size/type; or provide Environmental Product Declarations (EPDs) that document the required reduction in GWP.
Focusing on occupiers: demand, health, and well-being
In 2024, global real estate consultant JLL published The Green Tipping Point, a paper warning readers that the impacts of corporate occupiers’ carbon commitments will materialize in leasing markets over the next 24 months.
Tenants are increasingly demanding energy-efficient buildings powered by fossil-free energy. As Amsterdam-based Martijn Vlasveld, managing director, head of ESG and portfolio manager at Edmond de Rothschild REIM, explained: “Tenants are aiming to decrease their carbon footprint significantly and switching to energy efficient offices near large train stations. So, we need to speed up our cap-ex plans and update climate risk plans.”
The shift in occupier expectations has sustainability leaders focused on improving measurability. Vlasveld said that EdR REIM was “quite busy” with smart meters, having installed them on most of the funds’ assets. “We have done this for better reporting, so we have better EUI data per asset. We want to make a shift towards improving multiple assets at portfolio level instead of just collecting data and improving single assets.”
Paul Stepan, head of sustainability consulting for EMEA at JLL, said, “Don’t forget about the energy and transport transitions . . . . These are a huge-value pool landlords never had chance to play in—now they do. This could result in more income from the sites than they even receive in rent.”
There is also an emerging focus on how to structure key performance indicators (KPIs) around social impacts. Social impact is fluidly defined and includes a myriad of metrics, and thus remains a work in progress in 2025. Social impact could include a variety of considerations related to health, indoor environmental quality, and community well-being but also includes diversity, equity, and inclusion. As Rives Taylor, director of the Gensler Research Institute Resilience Center, put it, “the more we talk about it, the better.” By focusing on ensuring all tenants have access to safe and healthy buildings, decarbonizing buildings can lead to healthier outcomes for all.
Sourcing and storing green power
Green power infrastructure is a key focus in 2025 for sustainability leaders. Participants see it not only as a vehicle to greater energy independence and significant carbon reductions but also as a means to develop resilience to natural hazards. Chan said Shui On Land has about 35 percent of its assets operating with green electricity and is “pushing ahead for 45 percent.”
Several avenues are being explored by roundtable participants at their respective companies. From sourcing green energy directly, through local utility providers, to installing on-site renewables, such as solar panels on the roof of a building or connecting to virtual power plants, energy is no longer myopic.
London-based renewable energy consultant Tom Sharp at Syzygy Consulting said the firm is working extensively with solar—increasingly, microgrids and batteries—throughout Europe.
Sharp said that landlords would benefit from a dramatic decline in costs for solar photovoltaics and batteries in the coming months, and that new green energy opportunities are enabling the company to “put forward combined solar and battery solutions for assets.”
Participants cited major energy infrastructure projects as exciting developments in terms of increasing the options for sourcing green energy. Coming online in 2026 is the Champlain Hudson Power Express, a 339-mile (545 km) transmission wire—which crosses the Canada/United States border from Quebec—that will provide New York City with clean energy. In the U.S., Sonia Khanna—investment partner at Galway Sustainable Capital—highlighted how connecting to a virtual power plant could be a source of revenue for owners. She said, “We are looking at various mechanisms to improve energy efficiency in our multifamily buildings, for example, opting into a program that pays the building owner a fee for agreeing to reduced energy consumption during times of peak demand.”
The Chinese government, Haffner said, was “starting to focus more” on the concept of virtual power plants and demand response. He explained: “We have got a lot more renewables on the grid, and a lot more electric vehicles coming online. From an electricity system perspective, it will often be more cost effective to give incentives for users to reduce their demand at specific times than to have to build additional power plants to meet marginal demand. I think this supporting role is coming for the building sector. The government is already doing some pilot projects in different cities, and I think large commercial users of electricity will be approached to help with that over time.”
Investing in resilience
Action on physical climate risk is being driven by the financial risks of inaction, according to participants. Philippa Gill, executive director of strategic accounts at EVORA, highlighted the implications in the European roundtable: “The industry already has lots of stranded assets, where climate risk assessments were not done properly, and now those who bought unmitigated climate risk assets are hurting.”
London-based Andres Guzman, senior director, head of ESG-Europe at Tishman Speyer, said: “Next year, we will look to further advance our understanding of physical climate risk by refining how we assess these risks, translating insights into actionable strategies, and integrating these considerations into our budgets.”
Tishman is exploring a number of software tools that provide information on the range of hazards facing buildings. Guzman adds, “Our goal is to gain a more nuanced understanding of the unique characteristics of specific microlocations, not just from an investment perspective but also in terms of resilience. At the same time, it’s crucial to recognize the limitations of these platforms to make informed decisions. Ultimately, we’re working to understand how resilience influences the value of an asset and its surroundings, considering factors like local government defenses and infrastructure.”
Mark Bhasin, senior vice president of investment manager Basis Investment Group and adjunct associate professor of finance at New York University’s Stern School of Business, noted that rising insurance costs were being driven by climate change and inflation. He said: “People are just leaving the market [in some areas of the U.S.] because they cannot afford the insurance premiums, and they don’t want to deal with the disasters inflicted by extreme weather events.”
Antonio Marotta, ESG regional director for Italy at Catalyst, echoes this sentiment: “Using value at risk (VaR) at Catalyst has helped investors measure their climate risks.” This financial metric seeks to quantifiesy potential losses from physical and transitional climate risks into monetary terms. The 2024 ULI-LaSalle publication, Physical Climate Risk and Underwriting in Assets and Portfolios emphasized that it’s critical for firms to understand the data behind their climate value at risk quantification as a variety of approaches exist.
Peter Tomai, partner and chief investment officer at Specific Performance, confirmed that prudent owners and operators must ask, “How do we maintain resiliency of operations and purpose, for our facilities and communities, in the face of unprecedented weather extremes?”
We don’t want to distract from what’s important right now: prioritizing resilience and reduced carbon emissions.
Sustainability in 2025
This coming December, it will have been a decade since the negotiation of the 2015 Paris Agreement. This article underscores what real estate experts know to be true about sustainability: by working with innovative suppliers of low carbon materials, embracing the latest in green power, and creating more resilient and healthy communities, the real estate industry can stay focused in 2025. Industry leaders say that investing resources in ground-level education to ensure buildings are as efficient as possible, and not letting this work be overshadowed by the demands of regulation and compliance, should be priorities.
As architect Julie Hiromoto, partner, director of integration at HKS, said: “We are just getting started. This is our opportunity to align capital, create partnerships, and cross-market relationships to enable innovation to keep moving forward.”
