Decarbonising Real Estate: The Five Key Challenges You Must Address in 2025
For real estate owners and occupiers, decarbonisation is no longer a distant target—it’s an active, ongoing process. Many of us are now five or more years into developing and implementing our net zero strategies, and while progress has been made, significant challenges remain.
At a recent event with over 100 real estate professionals, industry leaders discussed the real-world obstacles slowing down decarbonisation efforts and the key priorities for those managing real estate assets. The message was clear: whether you own or occupy buildings, you must proactively address these challenges to avoid falling behind on targets.
Based on those discussions, here are the five most pressing challenges you should be considering in your transition plan in 2025—and why they matter for your portfolio and operations.
Skip to the end for a link to our follow up event, where we focus on the solutions to these challenges.
🏛 1. Regulatory Uncertainty & Political Backtracking
💡 The #1 challenge (61% in audience poll), with policy gaps delaying investment decisions.
The biggest concern raised was uncertain policy landscapes—landlords and investors cannot make long-term decarbonisation plans when EPC targets and enforcement mechanisms remain unclear.
- Achieving building regulations may not align with long-term net zero pathways like CRREM.
- Global policy divergence is widening—US investors are pulling back from net zero commitments, while UK and EU focus is shifting toward climate adaptation (e.g., flood resilience).
- Misaligned incentives mean that gas is still much cheaper than electricity, slowing heat pump adoption.
- Grid capacity constraints make electrification easier in city centres than in suburban or industrial locations.
📌 Why this matters:
Without strong regulatory and policy support, investment in decarbonisation will continue to stall. The industry needs policy clarity, long-term targets, and financial mechanisms to support energy efficiency and electrification.
👥 2. Disconnect Between Owners & Occupiers
💡 45% of attendees ranked this as a top challenge—misaligned incentives are a major barrier to retrofits.
- Landlords pay for retrofits, but tenants benefit from the energy savings—a classic split-incentive problem.
- Short-term lease structures discourage deep retrofits, as investment paybacks often exceed lease terms.
- Lack of transition planning leaves tenants unprepared for retrofit disruptions.
- Green leases and shared savings models remain underutilised, despite growing interest.
📌 Why this matters:
A collaborative approach between owners and occupiers is essential. Transition planning, tenant engagement strategies, and flexible leasing models can drive meaningful progress.
📊 3. Lack of Data & Transparency
💡 The third-biggest challenge (39% in audience poll) and a major theme in discussions.
- Sustainability data lags behind financial data, slowing C-suite buy-in and investment.
- Metering gaps mean many buildings lack real-time operational insights.
- Reporting and verification inconsistencies make comparisons across portfolios difficult.
- Opaque retrofit performance & valuation data leaves investors unsure of financial returns.
📌 Why this matters:
Data is the foundation of a strong business case for retrofit projects. Without better transparency, standardised reporting, and metering infrastructure, decarbonisation efforts will struggle to scale.
💰 4. Inability to Justify the Business Case for Retrofit
💡 Ranked as a growing concern (36% in audience poll).
- Many investors still view decarbonisation as a cost rather than a value driver.
- Traditional ROI metrics don’t align with long-term decarbonisation timelines—most financial models are based on short-term asset turnover.
- Valuation frameworks do not consistently price in climate risk, making sustainable upgrades harder to justify.
- Prime assets are progressing faster due to greater funding and tenant demand, but the secondary market remains underfunded.
📌 Why this matters:
We need better valuation methodologies, targeted financial incentives, and real-world case studies to shift the perception of retrofit from a compliance cost to a strategic investment.
⚙️ 5. Lack of Skills & Knowledge Gaps
💡 33% of attendees identified this as a top challenge—without skills, implementation will stall.
- Shortage of skilled engineers, retrofit specialists, and BMS experts.
- Finance and investment professionals lack ESG expertise, making it harder to justify sustainability-led investment decisions.
- Sustainability teams remain siloed, disconnected from core asset management and investment functions.
- Upskilling initiatives must scale up rapidly—real estate professionals need training on net zero risk, financing, and technical decarbonisation strategies.
📌 Why this matters:
Addressing the skills gap is a top priority—training needs to extend beyond technical roles to finance, investment, and asset management teams to ensure sustainability is embedded in decision-making.
Where Do We Go from Here?
The industry cannot afford to stall. To address these challenges, we need better policy clarity, data-driven decision-making, stronger financial incentives, and cross-industry collaboration.
To continue the conversation, we’re hosting two key events:
📌 Event 1: Policy, Finance & Skills – Navigating Decarbonisation in an Uncertain Landscape
💡 Focus: Tackling regulatory uncertainty, financing mechanisms, and skills shortages.
📌 Event 2: Transition Planning & ROI – Unlocking the Business Case for Decarbonisation
💡 Focus: Data transparency, owner-occupier collaboration, and proving the financial case for retrofit.
Join the conversation. How is your organisation tackling these barriers?
With special thanks to Accenture for their input into this paper.
