Demand for sustainable buildings has surged, positioning them as some of the most valuable assets in real estate. Architect Julie Winrow explains how energy-efficient design, climate resilience, and focus on occupant wellbeing are transforming the property market.
The value of sustainable buildings
Sustainable buildings don’t just reduce energy consumption and lower utility bills – they also provide a range of long-term benefits.
Those with energy-efficient features designed to the Passivhaus standard – the world’s leading standard in energy-efficient construction – are particularly appealing to homebuyers and investors. Their improved thermal comfort, reduced energy costs, and environmental benefits make these properties especially desirable as energy prices continue to rise.
So, what makes these buildings such valuable assets?
The UK Green Building Council highlights that sustainable buildings not only support environmental goals but also offer significant economic advantages.
Operational cost savings, enhanced brand reputation, and the ability to attract and retain top talent are key benefits for organisations. Furthermore, incorporating elements like green walls (vertical gardens that improve air quality and insulation) and green roofs (vegetated rooftops that reduce heat absorption and stormwater runoff) can increase a building’s value by between 3% and 15%.
Plus, investments in green infrastructure, such as urban tree planting and rain gardens, can raise property values in the UK by up to 3.5%.
BREEAM is an internationally recognised certification for a more sustainable built environment. In cities like London, research from the real estate and investment management firm JLL shows that BREEAM-certified office spaces can command an 11% premium.
For each level increase in Energy Performance Certificate (EPC) ratings can also boost rents by an average of 4.2%. Additionally, research from global real estate consultants Knight Frank indicates that prime green-certified buildings in central London can see up to a 12.3% premium. As a result, sustainable buildings are becoming a key differentiator in the market, offering investors safer, more profitable opportunities.
Stranded assets: the financial risk of ignoring sustainability
Properties that fail to meet energy efficiency standards risk becoming ‘stranded assets’. This refers to a building that loses value over time due to high energy consumption, poor insulation, and a lack of climate resilience. These properties may become difficult to sell or maintain, particularly as improved energy performance is required by environmental standards.
Research from Savills Estate Agents shows that nearly 87% of the UK’s office buildings fall below the minimum required energy performance level of EPC (the standard that indicates a building meets moderate energy efficiency criteria).
As regulations tighten, many commercial properties could become vulnerable to devaluation. Additionally, the increasing frequency of extreme weather events such as flooding, storms, and heatwaves will heighten the risk of property depreciation for buildings not designed to withstand these challenges.
Investing in energy-efficient buildings is not only an environmental imperative but also a smart financial strategy to mitigate long-term risks.
Green mortgages: financial incentives
Green mortgages are becoming a crucial tool in promoting the growth of energy-efficient buildings. They offer lower interest rates and more favourable terms for properties with high energy performance ratings, such as those with EPC A or B certifications. Lenders like Barclays and Halifax provide discounted rates for energy-efficient homes, recognising their reduced financial risks, and the rising availability of green finance is driving the construction of more sustainable buildings.
Energy-efficient buildings typically sell faster and at higher premiums than their non-green-certified counterparts. Institutional investors such as large financial organisations, pension funds, and insurance companies are fuelling the demand for sustainable investments, prioritising ESG (environmental, social, and governance) criteria.
These investors are increasingly seeking properties with low environmental impact, resilience to climate risks, and the potential for long-term financial returns.
Climate risks: the need for resilience
Climate risks are increasingly seen as a significant financial concern by both investors and property owners, and vulnerable buildings are at greater risk of devaluation. Properties that lack resilience to climate challenges will see their value decline as the impacts of climate change intensify.
A report by JLL reveals that 83% of occupiers and 78% of investors consider climate change a financial risk, and the market is increasingly focused on higher standards for energy efficiency and climate adaptation.
Flood-resistant measures, for example, can include raising buildings above flood levels on stilts, piers, or raised platforms, while flood-resistant materials and sustainable drainage systems (SuDS) manage stormwater locally.
Overheating is also a growing concern, particularly in urban areas where heat islands are prevalent.
This phenomenon occurs when urban areas experience significantly higher temperatures than surrounding rural areas, with particularly harmful consequences for the elderly.
In mitigation, measures such as shading devices and improved building fabric performance and ventilation could be employed.
Buildings that are not climate-resilient are not only more likely to lose value but may also become more difficult to insure.
Healthy buildings
The concept of healthy buildings has gained considerable momentum, as the science and research-backed WELL Building Standard reveals that these spaces can significantly enhance the well-being and productivity of their occupants.
This standard emphasises the importance of features such as natural lighting, indoor air quality, and access to green spaces. WELL standard research shows these measures improve physical health, reduce absenteeism, and boost productivity, resulting in substantial economic benefits for employers.
Healthy buildings tend to attract greater rental premiums, with street front greenery contributing up to a 10.5% increase in value. Studies also show that walkability can impact property values by 1-9%, depending on the property type (Pivo & Fisher, 2011).
Meanwhile, research from the MIT School of Architecture in the U.S. also indicates that buildings with health certifications command higher rents, with premiums ranging from 4.4% to 7.7%.
The future
The growing demand for sustainable and healthy buildings marks a pivotal shift in the real estate market, as investors, developers, and homeowners increasingly recognise their long-term economic, environmental, and well-being benefits.
Such properties are proving to be much more than just eco-friendly spaces … they are strategic assets which don’t just meet environmental goals but offer financial advantages that cannot be ignored.
It’s no surprise that the future of real estate lies in embracing sustainability, both for the planet and for long-term profitability.
The author is a sustainability-driven architect and environmental designer, specialising in sustainable architecture, Passivhaus design, and BREEAM. With a diverse background working in the UK, France, and the Netherlands, she focuses on creating energy-efficient, resilient buildings. Julie is passionate about the role of the built environment in promoting health, well-being, and sustainable business practices.
