Real estate needs to clean up its act. Accounting for more than a third (37%) of the world’s carbon emissions, executives in the property sector know that the clock is ticking. There is intense pressure from investors, legislators, and tenants to decarbonize their buildings and collectively transform the industry into one that promotes sustainability and social value.

In this push toward carbon neutrality, property technology (Proptech) has exploded in popularity. The rapid advancement of cloud computing, machine learning, and artificial intelligence have all inspired innovation. Software solutions now make optimizing day-to-day building operations and improving energy efficiency easier than ever.

This article will explore the most significant barriers to sustainability faced by the commercial real estate (CRE) sector, and how industry-leading proptech solutions can support businesses of all sizes in promoting more efficient and environmentally friendly operations from construction to facility management.

Key sustainability challenges facing commercial real estate

With rising global energy prices, investor-led ESG targets, and a post-pandemic shift in building usage, CRE portfolio management is unquestionably challenging in today’s business landscape. Firms are being asked to do more with less, maximizing their operational efficiency and reducing their environmental impact while improving tenancy experience and providing value for money.

Energy consumption and maximizing efficiency

The CRE sector continues to feel the strain of increased energy costs. Buildings account for 40% of Europe’s energy consumption, and this expense is hitting profits. Savills estimates that utility costs accounted for almost a quarter (22.5%) of the average service charge for office space during the height of 2022’s energy crisis.

As a result, investors are focusing their attention on getting the most out of existing assets through decarbonization – maximizing ROI through lower energy bills while making the asset more attractive to tenants. ProptechOS research indicates that office space in the US commands a 22% price premium on average if it has implemented Energy Star-certified equipment, rising to 37% with full LEED certification.

CRE portfolio managers are realizing the value of maximizing their operational efficiency, and are fine-tuning their building infrastructure through smart building management system (BMS) technology. Proptech solutions also enable cost and energy savings through predictive maintenance, automation of routine tasks through building automation systems (BAS), and Internet of Things (IoT) systems that monitor and optimize energy consumption.

Waste management and water efficiency

Waste from commercial buildings can contribute as much as 5% of its total carbon footprint. While this might seem insignificant, minimizing operational waste will impact a CRE organization’s scope 3 emissions levels and their indirect impact on the environment. 

From digital pollution such as unused computer hardware and smartphones, to recycling and food waste, businesses are increasingly turning to Proptech-powered waste management software to monitor and streamline operations to reduce waste and meet building regulation compliance.

Water efficiency is another practical challenge for CRE businesses. Commercial buildings can lower their bills by a third with optimized water use. Using water-efficient appliances, sensor-activated faucets, and advanced leak-detection infrastructure can all help organizations reduce water usage and, in turn, their environmental impact.

Regulatory compliance and reporting demands

CRE organizations are realizing the need to develop solid decarbonization strategies to reach industry-wide net-zero targets. As governments face increasing pressure to take climate action, the real estate industry is becoming subject to tighter regulation and reporting standards that can provide compliance headaches if the organization is unprepared.

In Europe, the Corporate Sustainability Reporting Directive (CSRD) is revolutionizing climate reporting, making it essential for businesses of a certain size to disclose their ESG reports. The directive works in tandem with the Energy Performance of Buildings Directive (EPBD), compelling building owners and managers to improve the energy efficiency of their properties, reducing energy consumption and associated greenhouse gas emissions.

Leading Proptech solutions helping CRE sustainability

Understanding the task at hand is one thing; it is another to find truly innovative solutions to address them. Organizations invest and implement proptech solutions throughout the global CRE sector to meet their carbon goals and improve their sustainability record.

Energy management success stories

Around 80% of a building’s energy usage can be controlled by BMS. Utilizing proptech energy management software to optimize its operational usage can significantly impact energy consumption and reduce monthly bills. 

CBRE, one of the world’s leading real estate firms, is implementing this successfully within its UK portfolio. Its implementation of proprietary software Asset IQ has implemented more than £1.2m of energy savings across 3.5 million ft2 of space in its commercial buildings, thanks to its real-time management of BMS data. One example from a 310,000 ft2 site in Birmingham was able to reduce energy costs by 20% – all achieved through efficient operation of legacy infrastructure. 

Schneider Electric, one of the industry leaders in energy management, optimized its BMS systems to save 335 tonnes of CO2 per year at Citycon Lippulaiva, one of Helsinki’s largest new urban mixed-use developments. Utilizing its IoT-enabled EcoStruxure BMS, it successfully implemented a microgrid system for optimized connectivity and energy management across the 1.6 million ft2 site. As a result, Lippulavia returns around €129,000 per year worth of electricity back to Finland’s national grid.

Smart building automation leaders

Building management is a complex task, but automation can take much of the heavy lifting to optimize routine processes and maximize building safety. The world’s tallest building, Dubai’s Burj Khalifa, is the best-known case study of successful smart building automation and was considered years ahead of its time when it opened in 2010. ABB has automated Burj Khalifa’s maintenance control, implementing predictive maintenance software to keep the building running 24/7. It remotely monitors each of the building’s 57 elevators and 400 electrical loads at the site.

Another market leader, Honeywell, has also utilized their automation platforms in the Burj Khalifa, making full use of IoT technology to regulate temperatures across the building’s 163 floors, which can vary by up to 15°C. Its IoT connectivity harnesses real-time data to automate maintenance for mechanical systems and quickly alerts management teams to incidents, significantly reducing downtime and reactive maintenance.

Proptech solutions for building retrofits

The commercial strength of Proptech is that innovative solutions can be delivered for savings and optimization of legacy structures, as well as new smart buildings. In fact, retrofitting is crucial for CRE businesses to meet sustainability targets, with new energy-efficient infrastructure installed to better incorporate proptech solutions.

Two of the tallest and most iconic buildings in the US, the Empire State Building in New York and Willis Tower in Chicago have harnessed proptech solutions to maximize the ROI of their refurbishments, both achieving LEED certification in the process.

Photo: By Dibumartinez23 – Own work, CC BY-SA 4.0

Completed in 1931, the world-famous Empire State Building underwent a $550m renovation in 2009 that reduced its carbon emissions by more than half. The tower is famed for its distinctive lighting, and these were all replaced with energy-efficient fittings. The structure has also been a champion of ENERGY STAR since its renovation, utilizing its Portfolio Manager software to achieve certification every year since 2010.

Meanwhile, the Willis Tower achieved LEED-platinum certification in 2019 thanks to an extensive retrofit, including installing a new HVAC system, modernization of boiler systems, and high-efficiency plumbing that reduces water consumption by 30%. Johnson Controls’ Metasys BAS platform automates and optimizes building operations, including the structure’s original 94 elevator cars, which were also retrofitted to reduce energy consumption.

Five emerging startups to watch

More than half of real estate companies are now turning to proptech solutions, and estimates suggest that the market is expected to be worth an estimated $119.9bn by 2032. In almost every aspect of the property sector, from energy management to design and build, proptech startups are reshaping the status quo.

1. Cohesion

A global leader in smart building technology, Cohesion’s real estate software connects and centralizes data from building systems into a unified platform. Its facility management platform automates repairs, building inspections, and vendor management, eliminating the busy work for FM teams. In 2024, it introduced a purpose-built generative AI assistant to advise CRE managers based on real-time data analytics.

2. Clockwork Analytics

Clockwork’s fault detection and diagnostics platform analyzes thousands of building data points and highlights those impacting building performance the most. Its automated analytics helps building managers optimize energy performance and enhance equipment reliability. 

3. Fixflo

This UK-based proptech startup quickly became the country’s leading maintenance management software. Its clients include many leading BTR landlords, including Dandara Living and YPP. Its software streamlines reactive maintenance and automates predictive maintenance, ensuring faster and easier compliance.

4. Briq

Ranked by Business Insider as one of the hottest proptech startups in the US, this AI startup is valued at over $150m, utilizing AI technology to automate financial workflows within the building and property industry. Briq makes financial and ESG reporting more straightforward thanks to its innovative use of AI.

5. Dottid

Trusted by CRE asset managers and their teams, Dottid’s software optimizes an organization’s lease pipeline. It uses real-time deal data to support top-level office, industrial, and retail asset management. Dottid acts as a single point of contact, saving leasing managers time and money with task automation and analytics. 

ProptechOS: An ecosystem of sustainable technology

If this article has helped you realize the value of proptech in solving major sustainability challenges in CRE, then consider ProptechOS as the solution to your building management needs. Our operating system for real estate collects data from your BMS, IoT network, and energy management platforms to accurately model building performance analytics in real time. Based on RealEstateCore, ProptechOS and its app ecosystem enable seamless access to best-in-class applications without needing more than one integration into your portfolio.

Our Energy toolbox, powered by proprietary software Optimize, enables portfolio-scale energy savings with a suite of solutions rather than a single fix. Save up to 36% on energy costs through advanced proptech applications, identifying quick-win opportunities across your entire portfolio, such as optimizing configurations and fixing failing equipment.

In today’s ESG-led property landscape, proptech solutions are essential to streamline your building portfolio and achieve optimum operational efficiency. You can achieve all of this and more with ProptechOS.

Your CRE business can sign up for a free trial of ProptechOS today. 

Per Karlberg

Per Karlberg, a distinguished technology executive, demonstrates deep expertise in the nexus of real estate, technology, and ESG. Holding advanced degrees from Lund University, and with key roles as CEO of our company and Co-Founder of ProptechOS, he has shaped the proptech field through significant contributions to real estate technology advancements. His instrumental work in co-authoring “The realestatecore ontology” has facilitated digital transformation and ESG breakthroughs in the real estate sector.

Read his full bio and information here.