Chapter 10
Sustainability
European Real Estate Market Outlook 2026
3 Minute Read
3 Minute Read
Transition plans will catalyse value creation despite regulatory shifts
Transition plans will act as a catalyst for transformation – an ambitious, forward-looking blueprint that harnesses data, portfolio intelligence, strategic investment planning, and strong governance to ensure real estate assets remain compliant, resilient, and high performing in a net zero future.
Globally, more jurisdictions now require transition plan disclosures, with standards converging around the International Sustainability Standards Board as the baseline framework. While initial requirements target financial institutions and large listed companies, we expect smaller firms will follow.
In real estate, a transition plan serves as a strategic roadmap to align portfolios with a low-carbon economy and meet net zero targets. The adoption of transition plans will continue despite regulatory shifts. They remain a critical tool for demonstrating credible climate commitments, managing long-term risks and identifying opportunities for value creation.
Investors, developers, and occupiers will need to implement solutions that simplify compliance, ensure consistent data quality, and provide a single source of truth for portfolio reporting. These solutions are likely to deliver measurable benefits, such as improved Net Operating Income, operational savings, and increased resilience, while enabling accurate financial risk quantification to inform valuation, insurance, and capital planning.
Figure 10: Global transition plan requirements
Trends to watch
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Importance of sustainability
Embedding sustainability into real estate strategies is no longer optional, it is a critical consideration for both risk mitigation and value creation. By addressing sustainability factors, organisations reduce exposure to regulatory penalties, physical climate risks, reputational damage, protect property and rental values, and boost occupancy rates and leasing activity.
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Regulatory requirements
Investors will increasingly act to improve their buildings’ energy efficiency due to rising energy market volatility and the forthcoming implementation of the revised EPBD. The updated directive introduces phased minimum energy performance standards (MEPS) for existing buildings, based on nationally defined benchmarks. This regulatory framework aims to require the renovation of the least efficient buildings, specifically targeting the worst-performing 16% by 2030 and 26% by 2033.
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Transition plans
There will be increased focus on future‑proofing real estate portfolios with a solid and robust transition plan. This is no longer just about compliance. Decarbonisation and climate risk management are becoming central priorities, particularly for vulnerable assets where climate hazards could impair long-term functionality and value.
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CapEx implementation
CapEx implementation will present challenges when organisations look to move from strategy to action. To overcome these hurdles, organisations can adopt phased investment strategies, prioritise projects with strong return on investment and compliance benefits, and leverage green financing instruments such as ability-linked loans or bonds. Digital energy performance monitoring and predictive maintenance can optimise capital allocation, while partnerships with technology providers and government incentive programmes can further reduce financial risk.
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Biodiversity
Biodiversity and social considerations are becoming increasingly valued in the real estate industry. Tools and methodologies such as biodiversity assessment frameworks, social impact metrics, and ability reporting standards, will enable stakeholders to quantify these impacts in a transparent and credible way. This data-driven approach can also become a decisive factor during building permit negotiations.