Seizing the green opportunity amidst uncertainty

The Asia Pacific real estate market is navigating a complex global landscape, facing headwinds from trade tariffs and geopolitical tensions that impact investor confidence and business strategies. Simultaneously, intensifying extreme weather impacts underscore the urgent need for climate resilience. JLL surveyed APAC-based commercial real estate investors in May-June 2025 to understand their sustainability perceptions amidst these pressures and uncertainties.

• Sustainability impacts investment decisions and value: 9 in 10 investors factor sustainability into their deal decisions, viewing it as a value driver through risk mitigation and financial returns.
• Economic uncertainty is top of mind for half of the investors in capital deployment now, but regulations and energy drivers are incentivizing climate action in the five-year horizon.
• By 2028, 4 in 10 investors will only invest in buildings with energy-efficient features and renewable energy, which are overtaking green certifications as key criteria.
• While only 1 in 4 investors currently implement concrete measures today, most are planning climate adaptation strategies to protect their portfolios.

Sustainability is now integral to investment decisions and value across APAC. The survey reveals that an overwhelming 91% of investors have factored sustainability into their deal decisions in the past 12 months. This focus affected deal values, with 63% of investors reporting that sustainability considerations impacted their bid offers.

Investors are primarily motivated by the financial viability and returns of enhancing assets and the potential for mitigating risks. Nearly half see sustainability as a key value driver, expecting higher asset valuations and lower insurance costs through minimizing climate risks. Demonstrating the business case for sustainable retrofits – highlighting lifecycle costs and benefits such as reduced operating expenses and increased asset value – is crucial for driving investor action.

It is understandable that investors are currently focused on immediate macroeconomic and geopolitical pressures, which can overshadow longer-term sustainability goals. 52% of investors identified economic uncertainty as the primary factor impacting capital deployment in APAC over the next two years. However, looking ahead, regulatory factors are resurfacing as key concerns in the five-year horizon.
 

Factors impacting capital deployment in the short and medium term

^{Q: Which top three factors will impact your capital deployment in APAC real estate in the next… Select three factors for each time frame.}

Regulations are a top factor for two-fifths of investors when deploying capital in the next five years, fuelled by concerns about potential value erosion. Specifically, 44% of investors are most concerned about legal or sustainability obsolescence risks in their current assets. As governments across APAC strengthen building energy codes and mandate climate disclosures (aligned with the International Sustainability Standards Board), regulatory compliance is becoming an impetus. Investors will face stricter rules for reporting their financed (scope 3) emissions and increasingly demand for building-level data.

Beyond compliance, investors believe that addressing climate risks offers a hedge against energy price volatility and spikes linked to geopolitical events and rising carbon price. Two in three investors anticipate lower energy costs, and nearly half expect protection against carbon prices by mitigating climate risks in their assets. As carbon pricing systems expand across APAC, decarbonization is crucial to minimize future carbon tax liabilities and safeguard asset values and returns.

Our survey highlights that energy efficiency and renewable energy are becoming essential criteria for future investments, even surpassing green certifications in importance.

Investors are prioritizing energy efficiency to comply with evolving regulations, reduce operating costs, and increase tenant appeal. Energy efficiency has emerged as a leading “must-have” for investors over the next three years. In fact, 60% of investors validate the sustainability initiatives in their investments through energy efficiency metrics. Consequently, they are seeking data-driven solutions to improve building energy performance and planning smart building technology enhancements for energy analytics and AI optimization.

The adoption of renewable energy is becoming a standard requirement for asset decarbonization. Investors are targeting assets powered by renewable or clean energy sources and exploring the potential for on-site renewable energy in existing assets. Over half are planning to implement renewable energy installations as part of their asset enhancement strategies within the next five years.

APAC is particularly vulnerable to the physical impacts of climate change, and the rising costs of climate-related disasters are creating long-term imperatives for action. JLL Research identified approximately US$685 billion of APAC commercial real estate located within the 15 cities most exposed to climate hazards (such as floods, storms and heat waves) in the region.

Although investors recognize the importance of integrating physical climate risks into their decision-making, most are still in the planning stage and have yet to take concrete action. Key challenges include a lack of asset-level data for scenario analysis and difficulties in quantifying ROI. Nonetheless, 4 in 10 investors intend to incorporate climate adaptation measures, such as flood management, into their asset enhancement projects in the next five years.
 

Investors approach to physical climate risk adaptation in portfolio

^{Q: Where does your organization stand in embedding physical climate risk adaptation in your portfolio?}

Investors/asset owners

Owner-occupiers and landlords

While short-term economic uncertainty and geopolitics dominate headlines, the accelerating impacts of climate change and environmental risks cannot be ignored. The convergence of climate risks, regulatory pressures, and rising demand for sustainable, climate-resilient properties is creating significant opportunities for investors, and in turn reshaping investment strategies and asset values across APAC. Investors who proactively embed sustainability in their core investment strategies will be best positioned to thrive in this evolving landscape.