Real estate typically represents one of an organization’s largest expenses. As companies consider the facilities that best align with their business goals, their location strategy weighs numerous factors—and increasingly, sustainability is one of them. Sustainable real-estate choices can impact construction and operating costs, access to funding, public perception, regulatory compliance, and more.
Investors, regulators, consumers, partners, and politicians alike have urged companies of all sizes and industries to consider their impact on the environment. But how should this affect real estate decisions for occupants and developers?
In this article, we’ll examine:
- What sustainability means for real estate
- How sustainable real estate impacts the bottom line
- The business case for sustainability in real estate
What sustainability means for real estate
Every building has a significant impact on the environment throughout its lifecycle. According to Architecture 2030, the built environment—including building operations, materials, and construction—accounts for 39% of global emissions.
Buildings generate operational carbon—emissions produced by maintenance processes and regular operations. Depending on circumstances, these may be considered Scope 1, 2, or 3 emissions.
Construction processes also generate substantial emissions, as does producing the materials needed for construction, such as steel and concrete. Construction and materials represent a building’s embodied carbon, which falls under Scope 3 emissions in sustainability reports.
Whether you own, occupy, or build real estate, the built environment produces emissions at every stage of its lifecycle, from construction to operations to demolition and beyond. And each of these areas offer opportunities for developers and occupants to reduce real-estate-related emissions.
Image source: Robeco
Sustainable construction and materials
In many cases, developers can choose more sustainable materials or partner with more sustainable suppliers. Microsoft, for example, has opted to build data centers with wood to reduce their reliance on steel and concrete, and by extension, reduce the emissions produced by data center construction. Sourcing materials from local suppliers can also reduce emissions associated with construction. So can using more efficient equipment.
Occupants can only directly control these emissions factors when they own the real estate, but tenants can influence sustainable construction by consistently favoring locations that have made these construction decisions.
Sustainable infrastructure maintenance
Throughout its use, real estate needs to be maintained, and maintenance produces emissions. Infrastructure has to be repaired, replaced, updated, and upgraded. Depending on which party bears responsibility for these decisions, owners and occupants can work to reduce unnecessary maintenance costs through preventive maintenance (or ideally predictive maintenance). These processes help ensure that infrastructure is used to its full potential and that materials and equipment aren’t discarded until they’re fully spent. And of course, stakeholders can also choose more efficient materials and suppliers.
Sustainable operations
The usage of real estate consumes electricity, gas, and water. Producing and transporting these resources creates emissions, which means that using real estate inherently involves producing emissions. Even non-industrial real estate has daily processes that produce emissions, such as lighting, heating, cooling, and worker commutes. Owners and occupants can take steps to operate more sustainably by optimizing resource consumption through automation, as well as choosing locations in milder climates with easy access to public transportation.
In our 2025 Enterprise Occupancy Tracking Report, sustainability was one of the occupancy tracking use cases that real-estate leaders felt was most aligned with their business needs.
Sustainable deconstruction
As buildings come to the end of their lifecycle, developers should consider ways to demolish, recycle, and repurpose real estate more sustainably. Can materials be salvaged or returned to raw materials? Is infrastructure being demolished in ways that produce more waste?
How sustainable real estate affects the bottom line
Sustainable business decisions are often perceived as being more rooted in ideals and politics than finances. This is at least partially due to the fact that some investments in sustainability are currently more expensive upfront than less-sustainable alternatives. But the reality is that making real-estate decisions with sustainability in mind can have a major effect on an organization’s bottom line. There are three distinct aspects of sustainability in real estate that have clear financial implications.
Image source: Tango Research: JLL
Mounting costs from climate risks
Extreme weather events like heat waves, floods, blizzards, forest fires, hurricanes, and tornadoes are highly disruptive and expensive—they can damage or destroy infrastructure and equipment, result in injuries and lives lost, and drive up insurance premiums. At the very least, they delay and disrupt daily operations including production, shipping, and sales. And for each of these events, their likelihood is directly connected to insurance premiums.
For developers, mitigating these costs requires sustainability to be top-of-mind in site selection—building in locations that decrease the risk of disruption from extreme weather events—as well as hardening infrastructure during construction, selecting materials and methods that make buildings and their operations more resilient.
Occupiers need to consider whether their locations and the facilities they occupy are increasing or decreasing their risk of incurring these costs, and incorporate climate risk in their real-estate decisions.
Rising demand for sustainable buildings
According to JLL, demand for sustainable buildings is outpacing supply—with 75% of demand currently unmet in the US, and over 50% unmet demand in Europe and Asia Pacific. In each of these regions, there’s a premium for green-certified office space, with rental costs being 7.1–11.6% higher for these properties. So while they may be more expensive to build, they can also generate greater profits for owners.
More stringent climate regulations
Globally, regulating bodies have been increasing sustainability requirements for years, working toward the shared goals of the Paris Agreement, which was adopted by 196 countries in 2015. While the US federal government backed out of the agreement for the second time in January 2025, many state and municipal governments are continuing to push for stricter sustainability regulations. So the larger and more distributed an organization’s portfolio is, the more likely they are to be subject to sustainability regulations that affect their real estate. If organizations want to avoid fines, penalties, and lawsuits, they’ll need to ensure their portfolios are in compliance with these regulations.
The business case for green buildings
For developers and occupants alike, there’s a strong business case for sustainability in real estate that’s rooted in both creating value and reducing risk. But the challenge is often determining exactly how sustainability aligns with your particular organizational priorities and business goals. Here’s what organizations should have in mind as they consider how sustainability fits into their real-estate strategies.
Image source: Tango
Sustainability in real estate: The occupier’s perspective
For occupiers, there are four central arguments for building a sustainable real-estate portfolio: reputation, costs, risks, and wellness.
Improved reputation
Employees, consumers, and investors care about whether the organizations they interact with are sustainable.
A 2023 Deloitte survey found that 69% of employees want their employers to invest in sustainability efforts, and 27% said that a potential employer’s position on sustainability would impact their decision to accept a job.
A 2024 joint study from NielsenIQ and McKinsey found that 78% of consumers say a sustainable lifestyle is important to them—and they clearly connect that to the brands and businesses they frequent. A 2024 survey from PwC indicated that 80% of consumers would be willing to pay a premium for sustainably produced or sourced products, with some being willing to pay an average of 9.7% more.
According to Morgan Stanley, more than half of individual investors planned to increase their allocations to sustainable investments in 2024, and more than 70% believed strong ESG practices were connected to higher returns.
Being perceived as sustainable generally makes organizations more appealing to job candidates, current workers, their target market, and investors.
Lower costs
When your real estate is more efficient, daily operations require less energy, and therefore cost less. Relying on renewable energy also makes your real estate less dependent on the grid, which reduces the impact of local fluctuations in energy prices and availability. And choosing locations that are less vulnerable to extreme weather events will mean your real estate poses less risk to insurers, allowing you to enjoy lower premiums. By incorporating sustainability into your location strategy, it’s also easier to comply with regulations, helping your organization avoid penalties and retrofit costs.
Better health, wellness, and productivity
Investing in sustainable real estate can directly affect the health and productivity of the people who work there. A Harvard study of the relationship between green buildings and cognitive function found that “workers in optimized environments scored 131 percent better in crisis-response questions, 299 percent better on information usage, and 288 percent higher in strategy.” Additionally, workers who were in green-certified buildings “performed 26 percent better on cognitive-function assessments than those in non-certified buildings.”
While there was certainly a higher cost-per-person for these green workplace investments, the study also found that the “benefits represented roughly $6,000 to $7,000 dollars per person per year, not including the co-benefits to health from diminished absenteeism and the avoidance of other so-called sick-building symptoms such as headaches and fatigue.”
Sustainability in real estate: The developer’s perspective
Developers can also build a strong case for bringing sustainability into their real-estate strategy with rationale that’s rooted in value creation and risk reduction.
Higher rental rates
As mentioned earlier, there’s not enough supply of green buildings to meet demand. And with office vacancy rates continuing to reach historic highs, developers need to consider how they’ll make real estate more attractive to occupiers.
Increased asset value
In the US, Europe, and Asia Pacific, the rental prices for green buildings are higher. Making the built environment more sustainable also makes it worth more. So while it may require significant upfront investment, developers can more than recoup these costs over time.
Lower emissions
Green buildings generate fewer emissions and have a lower carbon footprint. This can help decrease a developer’s regulatory risk and make it easier to comply with environmental standards.
Reduced insurance risks
A sustainable real-estate strategy should lead a developer to build in locations with lower risk of experiencing extreme weather events, decreasing the risk of insurance claims and reducing premiums.
Build a more sustainable portfolio with Tango
Incorporating sustainability into your real-estate strategy requires developers and occupiers to consider its implications for site selection, construction, leasing, daily operations, and your analytics processes. Tango’s suite of real-estate lifecycle management solutions are designed to help organizations optimize their portfolios based on their real-estate strategies—including strategies that incorporate sustainability.
In her session at Tango Connect, Annika Prinz explains this in greater detail. You can access her slides here, or request a demo to have one of our experts walk you through the ways Tango can support your sustainable real-estate strategy.