The real estate sector is undergoing a fundamental transformation driven by PropTech, a technological revolution reshaping operations and investments. But what is it and how can it help your real estate business meet its sustainability requirements?
What is PropTech?
PropTech encompasses a broad spectrum of products and services, designed to optimise every stage of the property lifecycle. From site selection, planning, and investment, to construction, energy use, and building management, these innovations are proving significant in supporting real estate businesses – particularly when it comes to sustainability reporting.
Sustainability metrics have become important considerations in the real estate sector, with increasing pressure for transparency and accountability. Tenants, landlords, and construction companies alike are facing heightened expectations to demonstrate their commitment to responsible practices. This shift is driven by growing investor demand, regulatory changes, and a rising awareness of the environmental and social impacts of real estate. Stakeholders are demanding clear and comprehensive communication of sustainability progress with robust data, which can be a complex undertaking for large companies.
ESG considerations in real estate
The impact on investment decisions
The landscape of real estate investment is undergoing a huge shift, driven by legislation and a growing investor focus on sustainable, high-performing properties. Investors are increasingly integrating ESG credentials into their decision-making processes, recognising that clearly defined strategies are needed for long-term financial and environmental resilience.
Investing in real estate represents a substantial, long-term financial commitment. Historically, investors have relied heavily on the experience and judgement of human experts and advisers for in-depth property assessments. However, these traditional methods can be time-consuming, labour intensive, and costly. As a result, a surge of PropTech solutions has emerged, aimed at streamlining real estate investment decisions. These technologies augment human expertise with data-driven insights, offering more efficient and accurate tools for research, valuation, and due diligence.
The competitive advantage
Many companies are realising that sustainability is a competitive issue. Assets with a strong energy performance and established ESG credentials now enjoy a clear competitive advantage and directly influence property valuations, attract a wider pool of potential buyers and tenants, and enhance their market appeal. However, properties with poor ESG rating or performance face increasing pressure, often leading to requests for discounted rental rates and reduced property values from investors, tenants, and buyers. While there may be some concerns about the cost of implementing ESG systems, doing nothing is no longer a viable option.
How can PropTech support the real estate sector?
For tenants
- Environmental impacts
Smart building technology plays a crucial role in optimising energy use. With rising energy costs and escalating legislative charges, eg as of 2030 all private landlords will be required to meet a higher standard of Energy Performance Certificate (EPC) C or equivalent in their properties – up from the current level of EPC E, energy efficiency has become a top priority, particularly in the commercial sector. These standards are expected to tighten as part of ongoing government efforts to tackle climate change.
Smart buildings can automatically match energy consumption to occupancy and usage, for example, by adjusting lighting and heating systems. They can also integrate on-site power generation, such as rooftop solar panels or micro-wind turbines, to reduce or eliminate reliance on the grid. Smart systems also enable tenants to monitor and optimise water usage and waste disposal, including tracking recycling rates. Furthermore, energy performance is increasingly important to investors, tenants, and buyers who want to stay ahead of legislative changes, improve cost transparency, and demonstrate a commitment to sustainable real estate choices.
Digital tools, such as virtual meeting rooms, site visits, and tours, reduce the need for travel, therefore lowering carbon emissions. While not replicating the in-person experience, it significantly reduces travel time and carbon emissions, while also facilitating international connectivity.
- Wellbeing and productive workspaces
Smart sensors optimise air quality, lighting, and temperature, creating a healthier and more productive environment for employees.
Adaptive technology allows tenants to tailor spaces for employee comfort and wellbeing, enhancing morale and retention.
- Data-driven governance for sustainability reporting
Tenants can access detailed sustainability performance data from building systems, enabling transparent reporting and compliances with regulations. PropTech supports sustainability reporting by efficiently collecting and organising data for reporting purposes.
For landlords
In today’s competitive market, landlords are recognising the link between property performance and talent retention. Hybrid working has elevated the working environment to a top-line issue for recruitment and retention, with employees valuing flexibility. The issue of remote working vs in-office working remains a topical debate, and many employers are encouraging a return to the office. PropTech potentially offers a solution by enabling landlords to provide personalised, high-quality working environments that enhance tenant satisfaction and attract top talent.
Additionally, PropTech platforms facilitate collaboration between landlords and tenants, enabling the implementation of shared sustainability goals. By providing tools for data sharing and performance tracking, landlords can work with tenants to optimise energy use, reduce waste, and improve overall building efficiency.
Finally, compliance is a crucial aspect of landlord responsibilities. PropTech solutions streamline the reporting of ESG performance, providing the data necessary for financing purposes and regulatory compliance.
For construction companies
Construction companies are at the forefront of sustainable development, and PropTech is playing a vital role in optimising their environmental impact. Material optimisation is a key area where PropTech platforms, powered by AI, can significantly reduce waste during construction by precisely calculating material needs and minimising excess, by analysing historical data and project plans.
Sustainable material tracking is another significant aspect. Technologies that track the sourcing and usage of eco-friendly materials support green building certifications such as Leadership in Energy and Environmental Design (LEED) and Building Research Establishment Environmental Assessment Methodology (BREAAM), enhancing the project’s sustainability credentials. To understand the impact of the upcoming regulations, please refer to our article on the Carbon Border Adjustment Mechanism (CBAM).
On-site sensors provide real-time monitoring of noise and air quality, enabling construction companies to control pollution levels and track data for sustainable performance. This data not only demonstrates compliance but also highlights the company’s commitment to minimising its environmental footprint.
How we can help
The real estate sector is rapidly evolving, with data-driven sustainability initiatives becoming essential for meeting increasing regulatory and stakeholder demands. PropTech provides crucial tools for accurate data tracking and streamlined sustainability reporting, enabling real estate companies to demonstrate quantifiable progress.
Our real estate sector team, which includes sustainability specialists, can support your business to enhance or define its sustainability strategy, capture relevant data, and navigate reporting obligations. If you’d like to discuss any of the topics covered, please get in touch.
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