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Picture this: You’re a CFO reviewing your company’s office lease renewal. You’ve got two options — one building is newly retrofitted with energy-efficient systems, offering lower utility costs and compliance with emerging regulations. The other? Let’s just say it still has light fixtures that belong in a ‘90s time capsule. Both are in the same neighborhood and have NNN lease terms. Which do you pick?
Right now, commercial real estate (CRE) is in the middle of a fundamental shift: If your office property hasn’t embraced green building strategies, it’s not just missing out on a “sustainability premium”; it’s getting hit with a brown discount. Tenants care, investors care, and some regulators really care, particularly in certain U.S. cities and global markets. Take New York, where Local Law 97 is pushing landlords toward energy efficiency; California, where Title 24 mandates strict building performance standards; and Colorado, where the Energize Denver ordinance is setting aggressive benchmarks for commercial properties.
While ESG as a buzzword may be losing steam in some circles, the reality is that commercial real estate sustainability is growing in importance. Who doesn’t love cost savings from energy-efficient appliances?! Not only that, many tenants prioritize amenities like high indoor air quality, access control measures, and cybersecurity. All of these items fall within the ESG mandate. So even when policymakers shift their stance, tenants’ decision-makers continue to care — especially when sustainable buildings offer lower operating expenses and a potential premium on lease terms.
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- Sustainability: The New Amenity War
- Why Energy Costs Are Becoming a Landlord’s Biggest Problem
- How CRE Owners Are Gaming the Green Transition
- The Data Speaks: Tenants Have Preferences
- The Call to Action (Without Sounding Like a Brochure)
Sustainability: The New Amenity War
For years, landlords fought over gyms, cafés, and rooftop decks. But what happens when the most sought-after amenity for tenants is an energy-efficient, sustainable building? Tenants today — especially those led by Gen Z and Millennials — aren’t just looking at location and price. They’re asking whether the building aligns with their corporate values and sustainability goals.
Something to think about:
- According to a 2023 survey, 80% of Millennials and 75% of Gen Z respondents in the U.S. reported that sustainability is a driving factor behind their purchasing decisions.
- The Deloitte Global 2024 Gen Z and Millennial Survey shows that a significant portion of Gen Zs research a company’s environmental impact before applying, reflecting their commitment to sustainability.
- More investors are factoring sustainability scores into property valuations, meaning a building with bad sustainability credentials could actually be worth less.
Why Energy Costs Are Becoming a Landlord’s Biggest Problem
Sustainability in commercial real estate isn’t just a feel-good initiative — it’s a hedge against wasteful spending. Imagine trying to run a modern shopping mall on an old, inefficient energy system. It’s like trying to run cloud computing on a dial-up connection: frustrating, outdated, and unnecessarily expensive.
Energy-efficient buildings aren’t just about optics. They’re about costs. Tenants are more aware than ever of operating expenses, and inefficient buildings are expensive to occupy. If your HVAC system is from the Jurassic period and the lighting eats power like it’s 1985, tenants will notice — because their CFOs do.
Tenants willing to pay a premium for green buildings aren’t doing so just for the PR boost. They’re locking in long-term savings on utilities and avoiding obsolescence risk in markets with emerging energy regulations.
It’s not only tenant demand driving this. Landlords, especially those backed by European and U.S. institutional investors, face growing pressure to hit sustainability targets to keep investment dollars flowing. The Global Real Estate Sustainability Benchmark (GRESB) is now table stakes for serious property portfolios. If your building isn’t hitting energy efficiency targets, you may not just lose tenants — you might lose financing. (Psst: Want quick tips on how to hit your commercial real estate sustainability goals while staying cost-effective? Check out our recent webinar, “Easy Wins for ESG: Cost-Effective Strategies for Commercial Real Estate Firms.”
How CRE Owners Are Gaming the Green Transition
Some owners are playing 4D chess with sustainability upgrades. Here’s how:
- Smart Building Tech: IoT, or Internet of Things, sensors, automated lighting, and HVAC controls don’t just lower energy costs — they give landlords data. And data equals leverage in lease negotiations.
- Retrofitting Older Buildings: New construction is expensive. The real game is retrofitting outdated stock to meet modern efficiency standards without gutting the whole thing. Tenants are asking for it, and city regulations (looking at you, NYC Local Law 97) will soon require it.
- Onsite Renewables: Solar panels on the roof and battery storage in the basement aren’t just a feel-good move. In some cases, they make buildings functionally independent from volatile energy markets.
Read our post on smart upgrades for more ideas on how to game the green transition.
The Data Speaks: Tenants Have Preferences
Understanding tenant and employee needs is crucial to aligning commercial real estate sustainability efforts with what actually matters to them. KingsleySurveys provides a streamlined way to capture unbiased feedback from tenants, including insights into their sustainability priorities and operational pain points. And according to KingsleySurveys, tenants do care about sustainability, especially when it saves them money.
Our latest data shows what matters most:
| Sustainable Feature | % of Tenants Prioritizing |
| Energy Efficiency | 79.8% |
| Recycling | 79.0% |
| Water Efficiency | 77.6% |
| Renewable Energy | 68.5% |
| Electric Car Charging Station | 51.2% |
You may not know that KingsleySurveys also provides employee surveys. Employee satisfaction and well-being also play a role in a building’s overall sustainability performance, and companies that track this data can earn additional points on the GRESB Real Estate Assessment.
The Call to Action (Without Sounding Like a Brochure)
If you’re a CRE owner, the reality is clear: Do something. Sustainability isn’t a nice-to-have anymore — it’s a survival strategy. Landlords who adapt will command higher rents, secure better financing, and keep their buildings relevant in a world that’s quickly realizing operational efficiency is key to long-term profitability.
For everyone else? Next time you walk into an office, retail, or industrial building, ask yourself: Is this place designed for the future, or is it just waiting to be discounted into oblivion?
This post is based on commercial real estate insights from Grace Hill and KingsleySurveys. Want to know where your building stands? Let’s talk.
