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Real estate

Tracking the real estate energy transition

Abigail Dean

Head of Strategic Insights, Nuveen Real Assets

Mark Cameron

Head of Sustainability, Asia Pacific

18 Jun 2025

1 min. read

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Despite considerable progress on decarbonisation over the past decade, the global built environment is currently not on track to become net zero carbon by 2050.

Realising a net zero carbon transition for the built environment will require critical objectives being met. Tracking indicators of progress towards these outcomes gives an idea of the pace of transition and if these goals are not reached, the transformation is unlikely to occur.

We have identified six indicators and classified them as an accelerant, bottleneck or neutral based on our assessment conducted in 2025.

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Click the indicators below to explore highlights from the report:

Investor appetite

Investor allocations will be based on decarbonisation goals

Investors continuing to allocate capital to low and zero carbon products is essential in supporting the transition
Regional variances are quite stark, with U.S. investors less likely to give weight to ESG, climate risk and net zero carbon (NZC) factors than their EMEA or APAC counterparts
Despite the ongoing consideration of NZC in allocations, investors do report seeing a slower pace to the energy transition than three years ago, with 61% responding that they see the transition to a low carbon economy as inevitable, down from 79% in 2023

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The impact of investor appetite on the energy transition

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Grid decarbonisation

Electricity grids in specific regions will continue to decarbonise

Global electricity grid carbon intensity has dropped 7% in the period of 2000-2023
The U.S. has led the way with a 35% reduction whilst Europe has cut 30%. Asia lags somewhat with a 6% reduction
The outlook for grid decarbonisation remains positive as renewables capacity accelerates and coal is phased out. Future forecasts indicate that several markets are well-positioned to transition or have already met global requirements
Buildings located in low carbon intensity grids will ultimately be cheaper to transition to net zero carbon, as they will not need to reach the same low levels of energy intensity to achieve net zero carbon standard

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The impact of grid decarbonisation on the energy transition

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Supportive supply chain

Supply chain dynamics will support energy transition

Real estate supply chains’ ability to deliver on net zero carbon is crucial to meeting ambitious targets
Construction costs continue to track above inflation which leads to a bottleneck effect as necessary retrofits and building improvements become less commercially viable
Lack of skills and costs of retrofitting buildings constrains the pace of transition
Around 80% of buildings in cities today will remain in 2050. To meet the transition, retrofitting of older stock must increase from around 1% to 3% annually, a considerable increase

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The impact of supply chain on the energy transition

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Cheaper technology

Technology to make buildings more energy efficient will continue to improve and reduce in cost

Reducing energy demand from existing and new buildings is key to the transition
To meet future projections, a further 44% reduction in energy intensity is required so continued innovation and cost reduction of technologies is paramount
While costs continue to fall for key technologies, challenges persist with implementation due to costs of installation, need for upfront capital and installer availability. A further consideration of electrification is the cost of electricity, which in some cases can be higher than using natural gas

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The impact of cheaper technology on the energy transition

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Tightening regulation

Building regulation around energy and carbon efficiency will strengthen

Regulations supporting the low carbon transition have developed at pace with new disclosure, taxonomies, ratings and accounting standards introduced
Europe will likely continue leading across the spectrum of regulation
The Asia Pacific region currently has lower stringency of regulation, however, it is moving towards alignment with Europe, particularly in markets where Nuveen invests
The outlook in the U.S. is complex. At a federal level it is unlikely that further regulation will be introduced. At city and state level it is more nuanced. Over 40 jurisdictions, accounting for almost 25% of U.S. building stock, have joined the National Building Performance Standards Coalition

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The impact of tightening regulation on the energy transition

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Occupier demand

Occupiers’ net zero carbon goals will inform their space requirements

Strong occupier demand is a crucial factor in decarbonising buildings
In 2024, more than 7,300 companies representing over 40% of global market capitalisation had an approved Science Based Target in place. The number of signatories has risen exponentially
This growth in occupier demand is being met by a limited supply of suitable assets. Recent data suggests a 70% supply shortfall in low carbon office buildings out to 2030
The supply/demand dislocation can be seen to produce rental premiums in certain markets where data indicates premiums of 5-10% are possible
When considering allocations, there are opportunities where a supply/demand imbalance exists

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