Our industry is engaged in an important dialogue to improve the efficiency and resilience of real assets through transparency and industry collaboration. This guest article contributes to that conversation and does not necessarily reflect GRESB’s views or position, nor does it represent an endorsement. The GRESB Insights blog is designed to share diverse industry perspectives and foster informed discussion on key topics for real assets investments.
As we pass the midpoint of the decade, it is increasingly clear that many organizations with 2030 climate commitments now face a widening gap between ambition and implementation. Real estate must accelerate action to deliver meaningful emissions reductions within this decade. There is now growing evidence on the effective actions portfolios can adopt to meet these milestones, but only if action begins now.
This article provides an evidence-based, practical framework for real estate owners and their stakeholders to prepare their portfolios for 2030.
Decarbonization to date: What the data tells us
International data sets such as IEA[1], and IPCC AR6[2] show lagging progress across building emissions. Critically, they tell us that operational emissions still represent the majority of real-estate emissions globally. Policymakers across Europe, UK, US and APAC are busy writing and implementing the next generation of energy performance standards (EPBD, SB253, BPS regulations) to try and address that.
Studies show that retrofit rates for the global building stock need to increase two-to-three-fold to remain aligned with a 1.5°C pathway[3]. Yet many buildings lack the asset-level decarbonization plans needed to guide these retrofit cycles. In the U.S. especially, planning readiness remains low: a 2023 study of 60 major U.S. REITs found that fewer than half had asset-level transition plans aligned to their net-zero commitments[4].
Macro context
A confluence of market dynamics is creating challenging conditions for the decade ahead. Electricity prices are rising rapidly just as the U.S. enters its first major spike in energy demand in decades due to data centers and AI[5] loads. At the same time, our utilities have retired significant generating capacity. In several regions, capacity markets are predicting shortfalls within the next 3-5 years. Without demand-side reduction, utilities will struggle to serve new electrification-driven loads during peak periods.
If these trends continue, certain regions could experience increasing reliability challenges, with material economic consequences. Electrification remains essential for decarbonization, but grid constraints and their cost will shape how, and at which pace, owners can implement it.
Early action in a strategic advantage
These dynamics are creating a widening divergence between owners who proactively respond and those who do not. Early movers will reduce compliance costs, improve Net Operating Income (NOI), capture rental and liquidity premiums, and strengthen valuations[6]. They will also avoid supply chain bottlenecks as demand for heat pumps, retrofit contractors, and skilled electricians accelerates.
Others will see margins erode as operating costs rise, compliance requirements tighten, and asset obsolescence accelerates. These structural shifts are so central to real estate economics that there will inevitably be winners and losers.
So what should real estate owners do?
1. Strengthen data governance
Despite years of focus, poor operational data quality and incomplete coverage remain persistent barriers. High-quality data is essential not only for frameworks like GRESB but also for accurately identifying where retrofits will have the greatest impact. Real decarbonization requires real performance improvement, and that depends on reliable, granular data. Shortcuts, assumptions, and correlations drawn from incomplete information generate misleading signals and undermine both financial and carbon outcomes.
Developing a data governance model is therefore one of the most effective first steps in a decarbonization journey. Establishing clear standards ensures that, beginning with due diligence, you can identify data gaps early and manage them through the hold period. This enables owners to make proactive metering and submetering strategies aligned with both regulatory requirements and the data needs of their investment approach.
2. Prioritize operational efficiency interventions
Research indicates that portfolios can achieve upward of 20% energy reductions through operational optimization before major capex investment[7]. We have seen repeatedly in practice. High-impact actions such as recommissioning BMS systems, tuning controls, optimizing HVAC setpoints and schedules, and establishing clear operational guidelines for tenants[8].
One example illustrates how fundamentals can go wrong: One of the largest multifamily buildings in the country operated for a decade with a sophisticated BMS but one that was not commissioned. No schedules were programmed. Hundreds of pieces of equipment ran 24/7 for ten years simply because a schedule was never input. This oversight resulted in far higher equipment failure, wasted energy, and ultimately hundreds of thousands of dollars in avoidable cost.
While extreme, this type of operational failure is not unusual, and it speaks to the widespread gaps in efficiency across the built environment. Operational optimization should be the first intervention, offering significant capex and opex savings, reduced regulatory exposure under BPS regimes, and improved asset up time.
3. Phased electrification & replacing fossil-fuel systems
Electrification, replacing legacy gas and oil systems with heat pumps and other electric technologies, is one of the most powerful levers for decarbonization. Yet the process is often framed as all or nothing. That is technically ideal but economically and operationally impractical for most owners.
A phased, hybrid approach is far more feasible. Under this model, owners plan toward all-electric systems in stages, aligned with investment strategies, capex cycles, local grid mix, and useful life of existing equipment. Many NYC owners, for example, have found that full electrification of their assets would cost tens of millions of dollars, and will not pay back within their expected hold periods given today’s electricity-gas price differentials.
Successful electrification planning requires alignment with grid decarbonization trajectories (CRREM, BPS laws) and ensuring that associated equipment, distribution systems, electrical capacity, and controls are all properly sized for future heat pumps.
Where immediate electrification is infeasible, owners can phase retrofits to meet existing heating and cooling requirements while preparing for full electrification. A useful real-world example is Empire State Realty Trust’s retrofit of 250 West 57th Street, a 527,600 sq ft mixed-use building in Midtown Manhattan. In collaboration with NYSERDA, ownership replaced the existing steam boiler plant with modular air-to-water heat pumps tied into the building’s existing chilled-water system, allowing electrified heating to come online with minimal tenant disruption. The heat pumps now serve as the building’s primary heating source, while the remainder of the system is reconfigured through subsequent phases. The project is expected to reduce annual natural gas consumption by roughly 6,220 MMBTU (about USD 80,000 in fuel savings) and cut carbon emissions by approximately 300 tCO₂e per year. This phased, infrastructure-first approach offers a scalable model for large commercial buildings preparing for 2030 targets[9].
Phased electrification can be both pragmatic and financially sound, particularly when paired with our current electric grids and owner-time horizons.
4. Deep retrofits where needed
When operational measures and equipment upgrades are insufficient, deeper interventions may be necessary. These include façade improvements, enhanced insulation, ventilation upgrades and advanced controls. Deep retrofits can reduce emissions by over 50%, but they require multi-year planning and are often only feasible when integrated with major repositioning projects. For example, London’s Southbank Centre retrofit achieved 50%+ reductions via roof insulation, glazing replacement, and HVAC upgrades as part of a major refurbishment[10].
How complicated is decarbonization?
Decarbonization becomes complex primarily when pursued in isolation. When sustainability strategies are separated from asset management and capital planning, they struggle to gain traction or fail entirely.
An integrated approach, one that models decarbonization capex alongside asset management priorities, enables more efficient planning and better sequencing of interventions. This approach supports robust scenario analysis, reduces lock-in risk, and allows owners to evaluate multiple capital pathways.
Starting in due diligence with early identification of risks and opportunities enables more effective green leasing, stronger tenant engagement, and greater data transparency. These, in turn, unlock shared retrofits and joint energy-saving programs. Combined with smart meters, dashboards, and fault detection and diagnostics, they underpin an operational performance framework that remains sustainable and value accretive over time.
Finally, embedding decarbonization responsibilities into investment, asset management, and operational teams, and linking targets to incentives, creates durable, organization-wide ownership. Decarbonization is only complex when it is separated from core real estate processes.
Delivering 2030 outcomes through integrated planning
The portfolios that succeed this decade will be those that treat decarbonization as a core investment discipline rather than a compliance obligation.
The evidence is clear: operational efficiency delivers immediate savings, phased electrification reduces long-term risk, and targeted deep retrofits protect value in tightening policy and grid environments.
The remaining gap is not technical but organizational. Integrating decarbonization into underwriting, asset management, and capital planning unlocks faster, lower cost delivery and reduces exposure to transition and obsolescence risk.
The next cycle of winners will be defined not by who sets targets, but by who operationalizes them. The most effective portfolios are already moving. Others must follow rapidly if they expect to meet 2030 commitments and maintain competitiveness in a sector where financial and carbon performance are now inseparable.
References
[2] IPCC Sixth Assessment Report WG III
[3] Global Status Report for Buildings and Construction
[4] University of Michigan / Urban Land Institute 2023
[5] Dominion Energy (VA) reported that data center growth will absorb 90% of all new grid capacity additions through 2030, delaying electrification-ready upgrades for commercial customers (Dominion IRP 2023)
[6] Green Street Advisors finds buildings with strong energy performance have lower cap rates and higher liquidity
[7] The Empire State building achieved a 38% energy reduction largely through operational optimization measures before major capex was undertaken (Rocky Mountain Institute, 2011)
[8] NABERS data shows ongoing building tuning can reduce energy use 10-20% annually in office buildings (NABERS 2022)
[9] https://www.nyserda.ny.gov/About/Publications/Featured-Case-Studies/ESRT-250-West-57th-Street
This article was written by Adin Meir, Managing Director USA at Longevity Partners. Learn more about Longevity Partners here.