The new green premium: creating value through decarbonisation

Across Europe, stricter regulations, changing occupier expectations and maturing capital markets are reshaping property values. Buildings with poor energy performance are becoming more expensive to own, finance and reposition, while efficient assets are proving more resilient at retaining their value. The biggest challenge is no longer constructing new sustainable buildings from scratch but transforming the existing vast building stock.

Today’s opportunity

According to the European Commission, around 85% of EU buildings were built before 2000, and more than 75% have poor energy performance. Yet the annual energy renovation rate remains at just 1%, well below what’s needed to achieve a zero-emission building stock by 2050. The greatest opportunity for decarbonisation, and arguably value creation, already exists within the buildings surrounding us.

This is already being reflected in the market. The RICS Sustainable Real Estate Survey Europe 2025 found that 72% of real estate professionals believe green buildings achieve higher rents, while 63% believe they command higher sale prices, suggesting sustainability is increasingly influencing both income and asset values. Meanwhile, policies such as the UK's Minimum Energy Efficiency Standards and the revised EU Energy Performance of Buildings Directive are accelerating the need to upgrade existing stock. For energy-inefficient properties, the cost of inaction is soaring.

Creating value from high-conviction sectors

Ardian Real Estate European Fund III was one of the first European value-add funds to achieve SFDR Article 9 designation, and has a 90%+ sustainable investment objective, aligned with the Paris Climate Agreement. Identifying assets with untapped potential and having the expertise to reposition them requires a local, tailored approach.

This opportunity exists across sectors where we have strong conviction, from offices and residential to PBSA and self-storage, although the route to value creation differs. In offices, for example, the focus may be on reducing embodied carbon, improving energy performance and creating healthier workplaces. The Ardian Real Estate team recently refurbished FARO, a Madrid office building, keeping the existing concrete structure, introducing smart building technology and reducing energy consumption by 36.7% compared with a typical Grade A office. It was sold to an occupier with demanding ESG requirements, showing how these improvements can strengthen an asset's long-term appeal.

Across every sector, the principle remains the same: operational improvements can boost rental performance, resilience and long-term liquidity. Within Ardian’s portfolio [1], refurbished properties have generated rental income c.16% above original underwriting assumptions following repositioning and sustainability improvements, while ARUP estimates the portfolio benefits from a 27% reduction in operating costs. Environmental and financial performance are increasingly mutually beneficial.

Staying local

Across asset classes, local operational expertise is becoming a competitive advantage. Successfully carrying out refurbishment programmes requires in-depth knowledge of local regulations, construction, supply chains and occupant behaviour.

Ardian's redevelopment of THE SHRED in Milan shows why. Our on-the-ground Real Estate team's understanding of Milan's planning and regulatory environment, construction market and sustainability requirements allowed us to future-proof the building. Their expertise guided decisions from the earliest design stages, from climate risk assessments to integrating renewable energy systems and low-carbon solutions. The asset is now a Nearly Zero Energy Building with reduced embodied carbon, energy consumption of just 65kwh/sqm, and certifications including LEED platinum, BREEAM very good, WELL Silver and WiredScore. These improvements helped the building achieve rents more than 20% above the market.

This combination of local execution and operational expertise enables investors to unlock both environmental improvements and long-term value.

Decarbonisation in practice

Decarbonisation begins well before work starts on site. It begins with identifying assets risks before acquisition, modelling realistic decarbonisation pathways, understanding physical climate risks and incorporating renovation costs into investment decisions from day one. During the holding period, this involves combining active asset management with digital tools, performance monitoring and collaboration with occupants to deliver best-in-class buildings aligned with the highest sustainability standards.

Technology is helping refine this process. Digital twins, smart meters and carbon trajectory modelling help investors understand how buildings perform throughout their lifecycle and identify where interventions can have the greatest impact. The industry is also scrutinising the ‘performance gap’ between modelled and actual performance. Even the most energy-efficient building must be actively managed to deliver its full potential.

The true value of the ‘green premium’

The investment landscape is evolving to support the decarbonising of buildings into Green+ assets, with sustainability-linked lending and more sophisticated climate data playing an increasingly prominent role.

As regulations, occupant expectations and capital markets continue to evolve, the gap between future-proofed buildings and those requiring significant intervention is likely to widen. The challenge is no longer simply identifying this gap but having the expertise to bridge it.

Decarbonisation is no longer performative; it’s creating tangible value. The buildings generating the most value over the next decade may not be those that appear strongest today, but have the greatest potential for transformation, in the hands of investors with the local expertise and long-term vision to realise that potential.

This is what the ‘green premium’ represents today. Not simply a building’s characteristics, but an investor’s ability to create buildings fit for the future.