Our industry is engaged in an important dialogue to improve the efficiency and resilience of real assets through transparency and industry collaboration. This article is a contribution to this larger conversation and does not necessarily reflect GRESB’s position.
Multifamily residential and the “living” sector are among the fastest-growing institutional asset classes in Asia and Oceania. Liquidity is deepening in Japan’s multifamily market, pipelines are expanding in Singapore and China, and capital is flowing into Australia’s build-to-rent sector as new incentives take hold.
However, as investors increase their residential exposure, particularly those with value-add or multi-asset mandates, sustainability performance often lags behind office or industrial sectors.
This is partly due to the unique dynamics of residential assets, including older stock, fragmented data, and the complexity of tenant engagement. However, these challenges can be tackled. Leaders have already shown that sustainability improvements are achievable, explaining the divide between high- and low-performing assets.
Amid pressure from capital providers and higher allocation to residential assets, there’s a push to bring sustainability credentials in line with other sectors. GRESB’s new Residential Component provides a dedicated framework, signaling that improvements are both necessary and achievable, while helping avoid cross-sector comparisons and leveling the playing field to allow leaders room to shine.
To help investors navigate the multifamily sustainability landscape, this article examines the challenges and practical pathways for improvement. After all, residential real estate is one of the world’s largest asset classes with a substantial environmental footprint. As people’s homes, it also carries a uniquely human and social role. That’s why it deserves a higher place on the sustainability agenda.
Accelerating investment into multifamily and “living” sectors
To understand why sustainability in residential is growing, it’s worth looking at capital markets trends. Unlike more mature multifamily markets in the U.S., Europe, and even Japan, the investment landscape in Asia and Oceania remains nascent. However, the region is catching up as more capital targets “living” strategies.
Cushman & Wakefield’s Head of International Research, Dr. Dominic Brown, notes the broader Asia Pacific “living” sector, spanning multifamily, build-to-rent, student, and senior accommodation, is “firmly in growth mode, though supply remains limited.”
As a result, newer buildings will emerge with sustainability embedded from day one, competing against older stock. This divide may widen as newer, green assets become more attractive to investors and residents than older, less sustainable ones.
Investor appetite is most visible in Japan, where the market has been steadily institutionalizing since 2009, and value-add funds have been active amid a rise in corporate buyers and foreign investors. In Australia, the build-to-rent pipeline is being lifted by government incentives, with recent portfolio transactions in “living” sectors helping alternative transactions reach AUD7.3 billion in Q2 2025, the second-highest quarter on record.
As institutional capital flows into residential, attention is turning to the ESG performance of these assets and whole-of-portfolio approaches. This is where perceived challenges can become uniquely valuable opportunities for sustainability enhancements.
To support this, GRESB’s new Residential Component, available to Real Estate Assessment Participants with predominantly residential portfolios, includes sector-specific indicators like fair housing, infrastructure quality, affordability, and community impact, providing a tailored and actionable framework for assessing and advancing residential asset performance.
Unique residential features present unique constraints
Residential assets are fundamentally different from commercial assets like office buildings and industrial lots. Lease terms are also often far shorter, and there’s higher tenant turnover. Occupants are also individuals and families looking to make a home, not businesses using the building as a tool.
These dynamics make operational control and sustainability interventions more complex, explaining why residential assets within multi-asset portfolios are often left until later. It also raises the question of what role a landlord should play in shaping the sustainability attributes of people’s lives.
These unique characteristics give rise to distinct ESG challenges, such as
- Data availability and access: Tracking energy, water, and waste metrics across individual occupancies remains difficult, especially when consumption is controlled at the unit level. Without whole-building smart metering or tenant data sharing, a baseline can be elusive. In some cases, privacy rules override or conflict with the goal of transparent disclosures.
- Ageing infrastructure: With residents in situ, retrofitting or major building upgrades can be costly and disruptive. Some wait for vacancies before undertaking lighting upgrades, HVAC improvements, or electrification, but this leads to broader project delays and uneven results. Phased works or relocations can extend payback horizons, which can clash with value-add strategies and shorter disposal timelines.
- Social challenge: Rising living costs and limited housing supply create a need for more affordable and inclusive housing, but this isn’t always a focus for investors seeking returns. Regulation and incentives are helping in some markets, but their presence is limited, and undersupply persists. Still, sustainability measures that reduce utility usage or increase access to shared amenities can help lower costs for tenants.
- Tenant engagement and diversity: Unlike commercial assets, residential hosts a spectrum of household types, income profiles, and cultural backgrounds. This diversity makes it difficult to apply sustainability initiatives uniformly. Bringing about change relies on education and incentives to promote positive behaviors.
Understanding the drivers can help sharpen investors’ focus on where to make a difference, align initiatives with strategies and timelines, and strengthen outcomes.
Turning challenges into value-creating opportunities
GRESB’s Residential Component considers both the idiosyncratic sector challenges and those common to all real estate, such as fragmented regulations or climate hazard risks. Tracking them also reveals the strongest improvement levers.
For investors, it can be positively reinforcing. By addressing challenges such as data gaps or implementing social value or tenant engagement measures, investors can drive asset performance, reduce operating risk, and demonstrate tangible sustainability progress.
Some of the opportunities investors can consider include:
Creating healthier, better-connected communities
Residential assets can shape social value beyond the property boundary. Affordable housing can support equitable community access, while on-site safety upgrades, shared amenities, and green common spaces boost resident well-being and community cohesion. Mobility and accessibility are equally important. Walkable design, proximity to transport hubs, EV charging, or connections to cycling networks reduce transport emissions and improve liveability.
Prioritizing tenant well-being and efficiencies
Sustainability gains momentum when it’s part of residents’ everyday lives. Sustainable and energy-efficient design and retrofits can reduce consumption and tenant costs. Better insulation, efficient lighting, natural ventilation, or letting in more daylight, support well-being and affordability. Moreover, efficient, well-designed buildings can’t be a costly exception. Tenants shouldn’t have to settle for less functional and unhealthy spaces when better options are available.
Moving proactively to renew infrastructure
Ageing facilities can benefit from a preventative approach. For example, regular maintenance checks can detect underperforming systems, allowing landlords to upgrade or replace equipment on their own timelines. Early intervention can reduce costs and improve efficiencies, extending asset life and resilience. Here, sustainable finance options may be considered, often at a lower cost of capital, helping upgrades deliver ESG outcomes and reinforce asset values.
Leveraging smart technologies
Technology advancements present new options to improve residential sustainability. Smart meters, building management systems, AI controls, and digital occupier platforms make utilities easier to track and optimize. There are also on-site solutions that are economically viable to implement, including solar installations, battery storage, or microgrids. These can reduce carbon intensity and utility costs, with savings passed on to tenants.
Keeping up with ESG developments across markets
As investors scale up residential strategies, navigating local market regulations, expectations, and performance drivers can become more time-intensive. Looking at Japan and Australia highlights the forces shaping the local operating landscape.
Japan in focus
Japan is tightening energy conservation standards as it strives for net-zero energy buildings (ZEB) by 2030. From April 2024, energy-efficient labels are expected to be disclosed when buildings are leased or sold. This allows tenants to compare buildings and estimate monthly utility costs where available. Moreover, the amended Building Energy Efficiency Act and Building-Housing Energy-efficiency Labelling System (BELS), mandatory for newly developed buildings from April 2025, bring new ratings into the residential sector. For investors, these changes require compliance while enhancing data comparability and transparency.
Australia in focus
In Australia, purpose-built rental housing is quickly growing, supported by changing government policy and demand for quality, well-managed rentals. Australia’s leading developers recognize the market dynamics, where choosing between an expensive mortgage and an unfair rental market is not ideal. This is driving the maturity of “build to rent” housing that can support choice and supply. Beyond the financial appeal, social outcomes are in focus. The Social Value Portal’s Real Estate Social Value Index (RESVI) is gaining traction, for example, as a way investors can benchmark social impact alongside environmental performance under NABERS and other frameworks.
So, as residential real estate grows within investor portfolios, there is an opportunity and an obligation to improve sustainability. It’s needed across the entire industry and ties closely to challenging social issues such as affordable housing, while also offering excellent financial and competitive outcomes. It’s a win-win, reflecting a key opportunity to move fast.
This article was written by Mika Kania, Head of Sustainability Advisory for Asia Pacific at Cushman & Wakefield. Learn more about Cushman & Wakefield here.