From Compliance to Competitive Advantage

Sustainability plays a growing role in real estate investment and occupancy decisions. However, many owners and investors are finding that the push to portfolio-wide net-zero carbon emissions feels daunting. Fortunately, there’s a more acceptable and achievable entry point that still delivers carbon benefits: lowering a building’s energy intensity.

In recent years, institutional investors have built out sophisticated systems to collect and report on sustainability data across their portfolios, harnessing data from smart meters, sensors and software. This comprehensive data foundation makes it possible to take strategic actions that improve building energy performance.

The current volatility in global energy prices has sharpened the industry’s focus on energy efficiency, but property owners have additional reasons to target sustainability in their portfolios. Green buildings appeal to corporate tenants, who increasingly have their own sustainability commitments and are actively seeking low-carbon spaces.

For institutional investors, this reality presents an opportunity to set their assets apart in a competitive market. Sustainability can become a true growth lever, delivering both environmental and financial returns. With a data-driven strategy, owners of large portfolios can transform sustainability from a compliance burden into a powerful drawcard for investors, lenders and tenants.

Opportunities to add value through sustainability are extraordinarily concentrated in London. The city tops the global ranking according to JLL’s Sustainability Value-Add Barometer, presenting a unique combination of market fundamentals that make the business case for energy-smart strategies. In particular, London leads the world in low-carbon lease demand and ranks #3 in the strength of regulatory support and pressure.

The link between sustainability, market resilience and investment performance is well established. JLL’s property management data reveals that assets with higher energy ratings, such as an Energy Performance Certificate (EPC) of ‘B’ or better, consistently maintain occupancy rates that are 3 to 6 percentage points higher and have much shorter void periods. JLL now estimates that 75% of future office and 65% of future industrial and logistics space requirements from top occupiers will be tied to corporate carbon reduction targets.

Recent JLL research also states that owners can generate higher rents and revenue premiums of 25% to 50% through strong energy ratings and sustainable improvements. Conversely, those building with poor energy ratings now face “brown discounts” of 10 to 20% as valuers and lenders price in transition risk. Nearly 70% of investors participating in JLL’s 2025 UK Investor Survey reported a dip in value for assets with poor sustainability credentials. This is the brown discount in action, and it quantifies the financial risk of inaction.

The rise of measured performance is also moving sustainability to the centre of the conversation. For many years, the industry has relied on the EPC rating, which captures design intent rather than actual energy use. Market demand is now shifting towards NABERS UK, which rates a building’s operational energy performance. This is quickly becoming a non-negotiable benchmark for Grade A offices and prime investment assets, particularly among the corporate occupiers who need to manage their own carbon footprints.

Policy is starting to follow, with the City of London Corporation's Planning for Sustainability guidance, adopted in early 2025, now setting NABERS UK targets for major office schemes: 5-star for new developments and 4-star for retrofits. As operational performance moves from market expectation to planning requirement, the direction of travel is clear.

Another factor is that sustainability performance is now directly tied to access to capital. Lenders are asking whether a building will still be compliant and attractive to tenants over the life of a 10-year loan, and the answer to that question directly impacts loan-to-value ratios and interest rates. “Sustainability has moved from the ‘nice-to-have’ Corporate Social Responsibility box right into the core of how lenders calculate their risk,” says Omar Rouchdy, Head of Sustainable Operations for JLL’s UK Property Management business.

A further consideration is the UK government’s recently confirmed plans to implement a minimum EPC ‘B’ rating for commercial buildings over 1,000 sqm in England and Wales by 2031. This target, which is tied to the UK’s legally binding net-zero agenda, will require a number of landlords and developers to make large capital investments to boost the energy performance of lagging buildings.

Facing these risks and opportunities, investors turn to data to guide their sustainability strategy. It can take up to two years to build a robust data collection and management system across a large portfolio of 50 or more assets. This initial effort is typically driven by compliance requirements such as EPC and Global Real Estate Sustainability Benchmark (GRESB) reporting.

Forward-looking property owners build sophisticated “data stacks” that often involve integrating foundational property management systems with specialised ESG platforms. With consent from the bill payer, owners can gather tenant-controlled energy data automatically using platforms like arbnco in conjunction with smart meters.

AI tools are becoming critical in sifting through enormous, messy datasets from different sources, identifying patterns a human analyst would miss and recommending operational tweaks in real time. When integrated with a building management system (BMS), AI can ingest streams of data from sources such as temperature and airflow equipment and make continuous micro-adjustments.

“The best thing you can do in a portfolio is to get the data,” notes Rouchdy. “As a sustainability team, once we know what these buildings are telling us and how they’re operating, we’re positioned to pull in the right experts and have a real impact on portfolio performance regardless of size.”

An important shift happens once investors benchmark their portfolios and can measure the impact of sustainability on valuation and financing. When a clear link between sustainability and commercial outcomes is established, investors start asking how they can make targeted interventions to drive better performance.

Centralised, comprehensive performance data across the portfolio brings valuable insights to the surface, driving smarter capital allocation decisions. Property owners can identify the poorest-performing assets, find areas for immediate improvement and analyze performance outcomes.

Sustainability actions can range from quick interventions to deep retrofits, depending on the investor’s time horizon and return expectations. “Sweating” a building through operational improvements, versus taking on larger net-zero capex projects, involves cost-effective optimisation measures such as BMS upgrades, lighting retrofits and tenant engagement programmes. Where investment strategies support longer hold periods and clients have committed net-zero targets, substantial capital programmes may be justified, including full HVAC replacements, facade improvements and renewable energy installations.

The most successful strategies typically involve a phased approach:

• Focus on the quick wins. Start by optimising the systems you already have in place: adjust your BMS controls, fine-tune temperature schedules and manage your lighting more effectively. These measures usually cost little to nothing to implement, but can deliver energy and cost savings of around 20% within the first year, while creating crucial internal buy-in.
• Advance to retrofits. The next phase entails using your performance data to pinpoint specific retrofit projects that have a clear payback. Examples include LED upgrades or installing new smart controls that immediately reduce risk and start improving your EPC ratings.
• For those looking to truly transform an asset and maximise its long-term value, strategic investments in larger projects can reposition a portfolio for the low-carbon future. Examples include full electrification, installing on-site renewables, and pursuing the operational rigour required to achieve top-tier NABERS ratings.

There is no one-size-fits-all solution. Many assets in the UK were built long before modern efficiency standards, so a deep retrofit or major investment may be technically complex or financially unviable. Having strong analytics and benchmarking is critical, as it allows property owners to pursue a tailored pathway and focus their capital where it will deliver the greatest return.

That pathway sharpens further when energy and sustainability data is brought together with the property management picture rather than read in isolation. Overlaying performance data with lease events, primarily break options, expiries and EPC expiry dates, and enriching it with the knowledge our site teams hold, such as tenant-led works that only surface through active occupier engagement, gives asset managers a far sharper basis for decisions.

This means sustainability interventions like MEES-driven EPC improvement works can be sequenced around the moments that matter commercially, so upgrades are negotiated as part of a lease regear rather than treated as a standalone cost. Positioned against the right benchmarks such as CRREM pathways, this becomes a genuine planning tool. Sustainability works stop being reactive compliance exercises and start aligning with asset business strategy.

By centralising and validating performance data within a dedicated platform, institutional investors achieve the high data coverage that directly correlates with higher sustainability scores. This milestone attracts tenants and provides capital partners with the confidence needed to deploy funds into portfolios. A robust data infrastructure also enables custom interventions that enhance energy efficiency and resilience and support long-term investment performance.

Once the data foundation is in place, investors can pivot from the necessity of compliance to the opportunity of intelligence, turning sustainability into a powerful tool for value creation.