Proptech, ESG and UK Commercial Real Estate is it value Creation or value theatre?
Thought Leadership by author Andrew Stanton CEO Proptech-PR
‘There is a growing, uncomfortable question at the heart of UK commercial real estate, is ESG, supercharged by proptech actually delivering meaningful outcomes, or are we optimising for the compliance crowd and it is just greenwashing?
For an industry built on long-duration assets and capital discipline, the scale of the ESG challenge is undeniable. But so too is the growing sense that the current approach risks becoming a high-cost, low-impact exercise in data, dashboards and disclosure.
As the months become years since this goldrush to get to carbon zero, just what tangible progress has been made. We all know that ESG stands for Environmental, Social, and Governance a framework that can be used to evaluate how a property asset performs beyond old school financial metrics. It’s widely used by investors, lenders, and regulators to assess risk, sustainability, and long-term value.
Breaking it down into its core elements, (E) Environmental focuses on how a commercial real estate asset impacts the natural environment. So an iconic example would be London’s Gherkin (30 St Mary Axe). Which ironically was constructed in the early 2000’s before the ESG movement, and so it was ahead of its time in that it incorporated many key environmental features.
It was designed to use 50% less energy than comparable office buildings, it uses natural ventilation instead of full air conditioning, and has a “double-skin façade” that acts like insulation, with spiral light wells pull air through the building (like lungs) maximising natural daylight and reducing artificial lighting demand
With lower carbon emissions, lower operating costs, reduced reliance on mechanical systems which made it at its time one of London’s first “ecological” skyscrapers
Second core element, (S) Social the occupant/tenant well-being and usability. Again the Gherkin has many social and occupier features nurturing the UX of those in the building. It has high levels of natural light deep into floorplates, fresh air circulation improves indoor air quality and open, column-free spaces improve flexibility and collaboration.
The whole design promotes healthier, more productive workplaces, which in today’s commercial marketplace aligns with ‘flight to quality’ offices and wellness-driven leasing decisions.
Third core element (G) Governance which in CRE is a more abstract strand, it is less about the building itself and more about how it is managed, reported and maintained.
For the Gherkin which was built by major institutional players Swiss Re originally, it was designed with long-term performance in mind and continues to undergo upgrades to remain compliant with evolving standards. It has strong asset stewardship, forward looking ongoing compliance with regulations, EPC, energy standards etc. This transparency is expected by institutional investors.
Now the reason I focused on the Gherkin was that it has good ESG credentials hard baked into its DNA, fundamentally due to its design and physics, and not so much a delivery of data. In its early days it achieved lower energy use, better working environments, and here is the rub, without needing dashboards, sensors, or ESG platforms (initially).
Of course it was constructed before net zero targets, so not fully aligned with 2030/2050 pathways and a retrofit will still be required to meet future EPC standards and ‘lacks’ the deep digital monitoring modern proptech enables.
Which in UK commercial real estate, typically includes, Carbon emissions (operational + embodied), Energy efficiency, Climate risk exposure (flooding, overheating) and waste and resource use. Because an office building with poor insulation and high energy consumption scores badly on E and may become non-compliant under MEES regulations.
The scale of the problem is real and immovable
Time for a deeper analysis, let’s start with the non-negotiables the built environment remains one of the UK’s largest carbon contributors. Buildings and associated uses account for roughly 22% of UK emissions, with commercial real estate contributing around 16% of that segment. At the same time, the structural challenge is profound, 80% of buildings that will exist in 2050 already exist today, 60% of UK office stock sits below a future EPC B threshold.
With some in the industry stating that 80%+ of commercial assets risk obsolescence without retrofit. Which I think means this is not a marginal upgrade cycle. It is a systemic, capital-intensive rebuild of the entire asset base, while those assets remain operational. So operating on the patient with its eyes wide open and no anaesthetic.
Did you know ESG is now a capital constraint
The shift from voluntary ESG to enforced ESG is already complete, the reason capitalism of course, the capital markets have moved faster than policymakers. 71% of lenders will not finance non-compliant assets without a transition plan. 63% of investors cite financial performance, not ethics as the primary ESG driver. This is critical distinction ESG is not being adopted because it is ‘right’ it is being adopted because it is now priced into liquidity, debt access and exit value.
So in practical terms, brown assets are becoming stranded assets, green assets are commanding valuation resilience, leaving the middle where the vast majority of stock is in a race against regulatory time.
Enter proptech with its measurement and optimisation toolbox
As if by magic and right on time Proptech has positioned itself as the operating system for ESG in real estate. From IoT sensors and digital twins to automated ESG reporting and AI-driven energy optimisation, the promise is compelling: measure everything, optimise everything, decarbonise everything.
But are the gains real? or are we in ‘The Emperor’s New Clothes’ territory, for sure we have portfolio-level carbon tracking, energy efficiency improvements through smart building systems, data driven retrofit prioritisation and even emerging circular economy marketplaces for materials reuse. Unfortunately to my mind though measurement is scaling faster than reduction.
The uncomfortable truth lots of data does not equal decarbonisation
Despite an explosion in ESG tooling and reporting frameworks, GRESB, TCFD, SFDR, EPC reform actual progress is uneven. Emissions from commercial buildings have barely shifted structurally since 1990 (+6%). Worse still demand for green buildings, while positive, has moderated recently.
Meanwhile, the industry is drowning in metrics, ESG scores, benchmarking indices, disclosure frameworks and certification schemes. I see these companies daily looking for new clients, but even industry bodies acknowledge inconsistency and ambiguity in ESG KPIs, which is slowing investment decisions rather than accelerating them.
This raises a serious question, are we optimising for reporting outcomes rather than real-world carbon outcomes? And is there a need for a standardisation of this new language which helps us build and retrofit.
The CRE retrofit paradox
This is the bit I think about a lot as my dog walks me around the fields chasing squirrels, it seems that the core battleground in ESG and CRE is retrofit. And this is where ESG ambition collides with financial reality.
Let us consider the economics, deep retrofit costs can exceed £100–£300+ per sq ft in prime offices, but with rental uplift uncertain outside prime markets, exit yields may not fully reflect capex invested. Yet failure to act risks regulatory non-compliance (MEES), loss of liquidity and insurance challenges linked to climate risk.
So is Proptech a hollow tool, yes it can identify what to do, it cannot though solve whether it is financially rational to do it.
Is ESG becoming a misallocated effort?
This is where my ‘waste of energy’ argument comes from, as there are three growing inefficiencies;
Over-investment in reporting infrastructure with firms spending heavily on ESG data platforms, often duplicating effort across multiple frameworks.
Under investment in physical change, with critical capital that could go into insulation, electrification or fabric upgrades is instead diverted into compliance layers.
Misaligned incentives, as investors want green credentials, occupiers want cost efficiency and CRE owners bear retrofit costs. With proptech sitting in the middle, it may sometimes be solving coordination, for sure it definitely amplifying complexity.
Stanton’s way a more pragmatic path forward
If ESG in UK commercial real estate is to avoid becoming performative it is quite simple there needs to be a ‘retrofit’ of the operating model. Moving from disclosure to outcomes
with less emphasis on reporting frameworks, more on measurable carbon reduction per asset.
We have to move from ‘green premium’ to a ‘brown discount reality’ markets need to fully price obsolescence and not just reward best-in-class assets.
In time the patchwork quilt of fragmented proptech solutions and services will give way to integrated operating systems, that next phase is consolidation, fewer tools, deeper integration and holy grail clearer ROI.
So maybe ESG is not a waste of energy but it is at risk of inefficiency, because there is an unavoidable structural transition looming tied to regulation, capital markets and climate reality. But parts of the current ecosystem, particularly the intersection of proptech and ESG, risk becoming highly sophisticated ways of measuring underperformance.
Definitely the winners in the next cycle will not be those with the best dashboards. They will be those who deploy capital into real asset transformation, use proptech selectively, not indiscriminately. And most importantly align ESG not with narrative but with net operating income and asset liquidity. Because ultimately, in commercial real estate, if ESG doesn’t translate into value, it doesn’t scale, that’s the real test still ahead.’
PROPTECH-PR is both a consultancy for Proptech Founders and an Advisory Service for the wider Proptech & Real Estate Industries, if you are running low on ideas, strategy or revenue, or just plain confused – please book an exploratory personal call to see if I can help. Using this LINK.
Andrew Stanton CEO Proptech-PR
