The State of Sustainability and Real Estate: 2025 Lessons and What’s Next for 2026

2025 has been a year of unpredictability for commercial real estate. Still, as economic conditions fluctuate and regulatory and investor expectations continue to evolve, sustainability has remained a core strategy for driving building resilience, performance, and long-term value. Across the industry, leaders are reframing sustainability as an operational advantage that strengthens financial outcomes, mitigates risk, and enhances long-term competitiveness.

As the market continues to transform, stakeholders are redefining what success looks like. Organizations that embed sustainability into decision-making as a business imperative are not only improving asset performance today but also positioning their portfolios to thrive in an increasingly complex and dynamic environment.

To explore these trends and the lessons learned from the past year, BREEAM USA recently hosted an end-of-year panel discussion featuring insights from real estate and finance industry leaders.

Panelists included:

• Giuliana Kunkel, Vice President of Sustainable Investing, BGO
• Chris Pyke, Chief Innovation Officer, GRESB
• Elena Alschuler, Head of Sustainability, Americas, LaSalle Investment Management
• Adam Slakman, Managing Director, Head of ESG Americas, J.P. Morgan Asset Management
• Hyon Rah, Head of Sustainability, Real Estate Americas, DWS Group

The discussion — moderated by BREEAM’s U.S. Director of Operations, Breana Wheeler — examined the key sustainability drivers that shaped CRE in 2025, before turning to what’s ahead for 2026 and beyond. The experts offered practical takeaways for building resilient, future-ready portfolios across asset classes. Key insights included:

1. Investor priorities and regional differences affect both portfolio performance and sustainability strategies.
   
   “I’d say expectations have increased significantly among European and APAC investors, particularly around decarbonization and physical risk management… I get questions constantly on both, especially as many of [the commercial real estate industry’s] U.S. investments are in the Sunbelt, where climate-related impacts pose real risks to long-term asset viability,” said Hyon Rah. “In the U.S., expectations vary more widely, with some investors like the New York City pension system recently recommending the rebidding of about $40 billion to strengthen climate resilience, while others face legal restrictions related to ESG. Balancing that range is difficult, but cost savings never go out of style and risk management never goes out of style, so we stay focused on efficiency because it works across both sides.”
   
   “It’s been a mix. European investors remain committed to sustainability, decarbonization, and climate risk management, and most large institutional investors, including family offices and high-net-worth individuals, are guided by their values, even if not always focused on environmental issues,” added Adam Slakman. “Asian institutional investors are coming up the curve, with some sovereign wealth funds hiring heads of sustainability for the first time, while Australian super funds have been ahead for years. REITs have also advanced significantly due to reporting requirements and focused portfolios… While this year has been challenging, [due to] changing tariffs and a difficult political climate — leading investors to focus on economic and political issues first… — sustainability will likely become a more prominent feature again over time.”
    
2. Data collection methods and evolving frameworks shape reporting credibility and operational impact.
   
   “Utility data remains challenging for many jurisdictions,” noted Giuliana Kunkel. “[BGO] is still determining the best methods of data collection at each property, whether through mobile meter readers, letters of authority, shadow meters, or tenant engagement — and whole-building data aggregation is still a grind. Quality data drives everything from benchmarking to planning retrofits and tracking project impacts. Another challenge is the moving goalpost of evolving frameworks and expectations… For someone in my role, this means constant education internally and externally, and every change requires re-examining our targets and pathways to ensure they remain aligned, credible, and achievable… These moving goalposts add complexity in telling a clear, consistent story about our goals and progress to clients and teams.”
   
   “We’ve come a long way on data over the past five years. The remaining gaps are largely in challenging asset types, including triple net lease retail and industrial, multifamily properties where whole-building data isn’t available, JV partnerships, and single-family rentals,” added Elena Alschuler. “Another major challenge is metric comparability. Investors frequently request EUI or GHG data, but differences in how measured versus estimated data are reported, how organizational boundaries are defined, and how intensity metrics are calculated make it difficult to ensure consistency. Addressing these comparability issues is the next frontier, because while investors are receiving more information than ever, much of it is inconsistent or not fully usable for investment decisions.”
   
   “The issue of moving goalposts has been a challenge,” confirmed Chris Pyke. “Over three-year development cycles, [GRESB] has tried to balance change with stability. Comparability remains a struggle, whether due to differences in data quality or interpretation. For example, some retailers report common areas as full buildings, which raises questions about whether that’s [an issue of] education, oversight, or something else. That said, when we say 70 to 80 percent data coverage for primary asset types like offices, I believe that is sufficient to characterize assets and make informed decisions… The next step is putting that data to work. For more difficult asset types like triple net industrial, we can take a more prescriptive approach. For instance, certain technologies allow us to estimate energy use without measuring every input directly. The key is finding ways to accept these prescriptive paths while maintaining confidence in the results.”
    
3. New technologies combined with evolving energy priorities have set the stage for 2026 decision-making.
   
   “Looking ahead to 2026, I think AI-related infrastructure will become a major focus,” shared Hyon Rah. “Many data centers are currently developed quietly, and they are extremely extractive in terms of energy and water use. As media attention grows and the physical cost to surrounding communities becomes clearer, the industry will need to demonstrate how these facilities benefit the communities they enter rather than just drawing resources from them. Data centers require few workers, construction is brief, and they offer limited economic benefit, while consuming significant energy and water… and they are not the kinds of assets that create community or activity. As the physical impacts of AI infrastructure expand, we will likely see greater scrutiny and pushback, and there will need to be clearer action to address these concerns.”
   
   “Looking ahead to 2026, I see energy affordability and reliability becoming even more central,” said Adam Slakman. “It’s already a major issue in elections, and AI infrastructure will intensify trends we’re already facing. We haven’t seen widespread cost impacts from data centers yet, though some areas are feeling it, but the water use conversation surprised me; I recently read that in 2023 data centers consumed only about 0.02% of U.S. freshwater, which is 3% of the water that U.S. golf courses use. That statistic made me rethink the narrative, because it suggests some of the water concerns may need to be redirected toward other targets.”
   
   “Valuation is going to dominate the 2026 conversation. The Canadians are talking about it, the UK is talking about it, Hong Kong is talking about it. We have been down this road before with valuation and sustainability, and I am not sure where it leads, but the momentum is there and the industry is going to engage with it,” commented Chris Pyke. “The second issue is electricity costs and retail rates fighting electrification. We have not fully come to grips with how disruptive that is and what solutions exist, and it stays on my worry list. The last point, and where I wish we were focused, is grid interactivity and flexibility. All roads lead to the need for less emphasis on baseline efficiency and more on managing load, flexibility and dynamic interaction with the grid, and I hope we can have that conversation because that is the future.”
   
   “We need to pivot the conversation toward managing peak demand and shaping load,” emphasized Giuliana Kunkel. “We must be intentional about how electrification and new loads, whether EV charging or cooling, are managed. For example, in New York City, even if you want to move off steam, you may not be able to electrify because the grid cannot support it or the building itself cannot handle the load. These are not just sustainability issues. They are direct levers we need to manage to protect and improve NOI in a rising cost environment.”
   
   “I am hearing more peers emphasize the shift from focusing only on energy efficiency to a broader approach: energy procurement, backup power, reliability, demand response, and grid flexibility. That is clearly the direction the industry is moving, and we need to keep watching it,” said Elena Alschuler. “Another encouraging development is growing tenant demand outside the office sector. We are seeing large corporations with industrial, logistics, and retail footprints push harder on sustainability, which is a very positive signal.”