What Is Decarbonization of Real Estate?
Decarbonization of real estate refers to the process of reducing or eliminating carbon emissions associated with building operations and construction. This is achieved by improving energy efficiency, switching to renewable energy sources, and implementing sustainable building practices. The ultimate goal is to achieve net-zero carbon emissions, aligning with global sustainability targets such as the Paris Agreement and national net-zero commitments.
Steps to Achieve Decarbonization
Decarbonizing real estate is a critical step toward achieving Net Zero, given that buildings account for nearly 30% of global energy consumption and 27% of total energy sector emissions. While newly constructed buildings are generally more energy-efficient, 80% of the buildings that will exist in 2050 have already been built, making it imperative to optimize and retrofit existing stock.
Based on CIM’s Roadmap to Net Zero framework, here are the essential steps for real estate companies to decarbonize their portfolios:
1. Monitor and Digitize Operations
The first step is to establish continuous monitoring using smart building technologies like IoT sensors, AI-powered analytics, and automated fault detection. This data helps identify inefficiencies, prevent energy drift, and improve overall system performance. Without real-time monitoring, energy waste and operational inefficiencies remain hidden, making decarbonization efforts less effective.
2. Optimize Existing Building Performance
Before upgrading equipment, buildings should be optimized to ensure existing systems run at peak efficiency. Simple adjustments like optimizing HVAC controls, adjusting temperature setpoints, and automating energy-saving measures can lead to significant reductions in energy use. Even a 1°C change in temperature settings can cut energy consumption by 5–10%. Regular maintenance and fine-tuning of systems help prevent unnecessary energy waste and improve long-term sustainability.
3. Upgrade and Electrify Equipment
Aging infrastructure is one of the biggest obstacles to decarbonization. Replacing gas boilers with heat pumps, upgrading lighting to LED systems, and installing variable speed drives on pumps and fans can significantly reduce energy use. Electrification of heating and cooling systems is particularly impactful, as it eliminates reliance on fossil fuels while improving efficiency. Investing in modern building management systems further enhances control over energy consumption and reduces operational costs.
4. Invest in Renewable Energy
Shifting to renewable energy sources is essential for long-term decarbonization. Where feasible, buildings can integrate on-site solar panels, wind energy, or solar thermal systems to generate clean power. For properties with limited space, off-site renewable procurement through Power Purchase Agreements (PPAs) provides a viable alternative. Energy storage solutions, such as battery systems, further enhance efficiency by storing excess renewable energy for peak demand periods.
5. Offset Remaining Emissions (as a Last Resort)
After implementing efficiency measures and renewable energy solutions, some emissions may still remain. Carbon offsets, such as reforestation projects or investments in carbon capture technology, can be used to neutralize residual emissions. However, offsets should be a last resort rather than a primary strategy, as they are often criticized for greenwashing and their long-term effectiveness is uncertain. Companies should prioritize reducing direct emissions before relying on offsets.
For a more detailed breakdown of these steps, including real-world case studies and expert insights, refer to CIM’s Roadmap to Net Zero guide, which provides a comprehensive strategy for commercial property owners and managers looking to decarbonize their portfolios effectively.
Benefits of Decarbonization for Property Owners
For property owners, decarbonization offers a range of tangible benefits:
- Increased asset value: Green buildings often command higher market valuations and rental premiums. According to CBRE’s NABERhood Watch Report, rents are 1%-5% higher among 5.5 and 6.0 Star-rated CBD office buildings.
- Lower operating costs: Energy efficiency measures reduce utility bills, with energy expenses accounting for 10-15% of overall building operating costs. Premium and Grade A offices can achieve energy costs 0.9% to 1.7% lower as a percentage of rent.
- Regulatory compliance: Decarbonization helps property owners stay ahead of evolving regulations, avoiding fines and maintaining market competitiveness. For instance, New York City's Local Law 97 (LL97) sets stringent carbon caps for large buildings, with penalties for non-compliance.
- Enhanced tenant appeal: As tenants increasingly prioritize sustainability, green buildings with lower carbon footprints become more attractive, improving occupancy rates.
- Future-proofing investments: By adopting sustainable practices now, property owners can reduce the risk of costly retrofits later as regulations tighten.
Decarbonization Regulations Shaping the Real Estate Industry
Decarbonization in commercial real estate is driven by various regulatory frameworks worldwide, which set energy efficiency standards, carbon reduction targets, and green building requirements. Below are some of the most advanced frameworks in the United States and other regions:
- Local Law 97 (New York City): Imposes carbon emissions caps on large buildings, with penalties for non-compliance.
- Title 24 (California): Sets building energy efficiency standards that indirectly support decarbonization.
- Building Performance Standards Across U.S. Cities: Cities like Washington D.C., Seattle, and Boston have adopted BPS that set emissions or energy efficiency thresholds for commercial buildings. These laws require property owners to improve performance over time, with stricter targets introduced every few years.
- Canada: Toronto Green Standard (TGS): TGS mandates commercial buildings to meet strict energy performance and emissions limits. The latest updates require net-zero ready designs for new commercial developments.
- UK: Minimum Energy Efficiency Standards (MEES): Requires commercial properties to meet a minimum EPC rating of B by 2030 or risk penalties.
- EU: Energy Performance of Buildings Directive: Requires all EU countries to improve building energy efficiency, setting minimum performance standards and requires all new commercial buildings to be Nearly Zero Energy Buildings.
- Australia: NABERS: Government and corporate tenants require high NABERS ratings as part of their leasing agreements, pushing landlords to improve building efficiency and sustainability.
How Building Analytics Supports Decarbonization
Building analytics plays a crucial role in decarbonizing commercial real estate by optimizing energy use, reducing emissions, and enhancing efficiency. Platforms like CIM’s PEAK Platform provide real-time insights, AI-driven fault detection, and automated performance monitoring to help buildings meet sustainability goals.
By continuously tracking energy consumption, PEAK identifies inefficiencies, prevents energy drift, and ensures HVAC systems operate at peak performance. AI-powered diagnostics detect faults in real-time, preventing unnecessary energy waste and reducing reliance on fossil fuels. Predictive analytics enable proactive maintenance, avoiding costly breakdowns and further optimizing energy efficiency.
Building analytics also supports compliance with sustainability regulations like NABERS, LEED, and Local Law 97 by automating energy tracking and reporting. Additionally, it facilitates load shifting and renewable integration, helping buildings use clean energy more effectively.
With data-driven insights, building analytics empowers property managers to cut emissions, lower operational costs, and drive progress toward Net Zero Carbon.
Conclusion
Decarbonization is reshaping commercial real estate, and the shift toward Net Zero is happening faster than ever. With increasing regulations, rising energy costs, and growing tenant expectations for sustainable spaces, property owners can’t afford to take a passive approach. The key is real-time visibility, smarter operations, and a strategy that prioritizes efficiency before costly retrofits.
That’s where building analytics software makes a difference. By leveraging AI-powered analytics, fault detection, and automated energy management, real estate teams can cut emissions, reduce costs, and stay ahead of compliance requirements—all while making their buildings more efficient and resilient.
See It in Action
Watch a demo of PEAK Platform to see how real estate leaders are using data-driven insights to drive meaningful change, optimize performance, and future-proof their assets.
