The Rise of ESG in CRE: What Investors and Brokers Need to Know

Key Takeaways

• Climate risk, insurance changes, and new reporting expectations are pushing ESG into early due-diligence conversations.
• No longer a nice-to-have, ESG is now a core part of how commercial real estate properties are evaluated, priced, insured, and leased.
• Buildings that document sustainability performance often hold value better and attract stronger tenant and investor interest.

Environmental, social, and governance (ESG) factors have become central to decision-making in commercial real estate. What used to be a niche concern is now shaping how properties are underwritten, insured, and managed. Tenants want efficient, healthy buildings. Investors want lower long-term risk. Regulators want clearer reporting.

As these pressures build, brokers and investors need a practical understanding of why ESG matters in commercial real estate market and how it influences pricing, risk, and long-term value.

Why ESG Is Now Essential to CRE Decision-Making

ESG can feel like a broad concept, but in commercial real estate it shows up in very practical ways. 

• The environmental piece affects utility costs, system life cycles, and a property’s exposure to climate risk. 
• The social dimension influences tenant satisfaction, employee well-being, and overall retention. 
• Governance speaks to reporting, compliance, and how clearly an owner documents building performance.

Together, these factors now influence underwriting, pricing, and leasing decisions early in the transaction process, often well before a deal closes.

ESG has also shifted from a trend to a financial reality. Climate events are becoming more frequent and more expensive, and insurers are adjusting accordingly. NOAA reported in 2024 that the U.S. has seen a record number of billion-dollar weather disasters in the past two years. Rising premiums and stricter coverage requirements are now affecting deals in ways the industry hasn’t seen before.

Regulation in 2026 is accelerating the shift toward more transparent and efficient commercial buildings:

• New York City’s Local Law 97 requires many large buildings to cut emissions or pay steep fines, which began in 2025.
• In California, SB 253 and SB 261 now obligates companies, including many real estate owners, to report emissions and climate-related financial risks.
• At the federal level, the SEC’s 2024 climate disclosure rule requires public CRE companies to disclose climate risk and greenhouse gas data in their financial filings.

At the same time, tenants and investors are asking deeper questions about building performance and long-term operating costs. These expectations influence everything from leasing activity to asset valuation.

These forces are reshaping the commercial real estate market. Below are the areas where ESG is having the biggest impact on day-to-day decision-making for CRE professionals.

Climate Risk and Financial Exposure in Commercial Real Estate

Research now shows that climate hazards are directly influencing operating costs and long-term asset performance.

McKinsey’s sustainability studies note that extreme heat, flooding, wildfires, and severe storms are expected to raise insurance premiums, increase utility expenses, and shorten the lifespan of major building systems. Markets that experience repeated events may also see higher vacancy as tenants seek safer, more reliable locations.

CBRE’s climate-risk analyses reflect similar findings. A large portion of global commercial buildings sit in areas exposed to coastal flooding, storm surge, drought, or wildfire. These conditions often lead to higher capital spending, more frequent repairs, and increased pressure from insurers - all of which affect underwriting and valuation.

Tenant Preferences and Demand in Commercial Real Estate

Tenant expectations are shifting quickly. JLL’s Decarbonizing the Built Environment report shows that nearly 70% of major companies want their real estate to help them meet carbon-reduction goals. Many now look for buildings with lower utility costs, healthier indoor air, and transparent sustainability reporting.

Deloitte’s 2026 Commercial Real Estate Outlook confirms this trend. More tenants are prioritizing spaces with energy-efficient systems and documented upgrades because they lower expenses and support employee well-being. As a result, ESG criteria are becoming part of early site-selection discussions, rather than something tenants evaluate late in the leasing process.

For brokers, this means that sustainability features can be just as important as rent, parking, or location when presenting a listing.

Capital Markets and ESG Investor Priorities

ESG is also reshaping how capital flows through the CRE market.

GRESB surveys show that investors are directing more capital toward properties with measurable sustainability performance. Many institutional buyers now screen assets for climate resilience, energy use, and compliance with new reporting rules before making a commitment.

The World Green Building Council notes that sustainable buildings often demonstrate stronger long-term performance because they run more efficiently and face fewer regulatory risks. These patterns point to a clear shift in sustainable commercial real estate investing. Assets that can document ESG progress tend to attract more interest, while properties with poor environmental performance face greater scrutiny.

What ESG Means for Property Values and Deal Structuring

ESG factors now influence how buildings are priced and how deals are structured. High utility bills, outdated systems, or known climate risks can tighten underwriting and reduce buyer demand. Properties with strong performance data (such as recent efficiency upgrades or documented emissions reductions) often see better retention, stronger leasing, and more stable valuations.

Platforms like Crexi, which centralize property information and market activity, make it easier for brokers and investors to compare assets, review historical records, and understand how sustainability factors may affect long-term value.

ESG Due Diligence Questions Every Broker Should Ask

As ESG becomes more common in commercial real estate transaction reviews, building simple checks into early conversations can prevent surprises later. Useful questions include:

• Has the building been benchmarked for energy use or emissions within the last year?
• Is it located in an area exposed to wildfire, flooding, heat, or other climate hazards?
• Have insurance premiums gone up, or has coverage become harder to secure?
• Will upcoming regulations require energy reporting or emissions reductions?
• What upgrades will likely be needed in the next five to ten years?
• Are there existing certifications such as LEED or Energy Star, or sustainability reports available?

Brokers often rely on clear, verified data to answer these questions. Crexi Intelligence can help by providing ownership details, property history, and other key insights in one place, supporting stronger due diligence and more confident decision-making.

How ESG Shapes Leasing Strategy

ESG is also influencing how commercial landlords attract and retain tenants. Many companies now want spaces that offer lower utility costs, improved indoor air quality, and reliable reporting on building performance. These features help them meet their own sustainability goals and create healthier workplaces.

Spaces with efficient systems or basic certifications often lease faster because they show a commitment to long-term building quality. For owners, even modest upgrades - better lighting, modern HVAC controls, or improved insulation - can strengthen retention and help keep occupancy stable in competitive markets.

What to Expect Through 2026 and Beyond

The role of ESG in commercial real estate will continue to expand through 2026 and over the next several years. 

More states and cities are rolling out rules requiring energy reporting and emissions reductions, making sustainability data part of standard due diligence. Insurance carriers are also tightening coverage in high-risk areas, which may further increase operating costs for vulnerable properties.

Investors, especially long-term capital groups, are focusing more on assets that balance efficiency, resilience, and transparency. These expectations are likely to influence deal terms, pricing, and leasing strategy well into the next decade.

Final Thoughts

ESG has become a practical, financial factor in commercial real estate. Properties that can document performance, manage environmental exposure, and meet tenant expectations are better positioned for the future. Brokers and investors who understand these shifts can help clients reduce risk, support compliance, and uncover stronger long-term opportunities.

With Crexi offering fast access to key insights and historical property data, CRE professionals can navigate ESG questions with more clarity and confidence, and stay ahead as the market continues to evolve. Check out climate and ESG data and more with Crexi Intelligence.

Frequently Asked Questions

What is ESG in commercial real estate?

ESG stands for Environmental, Social, and Governance factors that influence how commercial properties are evaluated, priced, and managed. Environmental covers energy efficiency and climate risk, social includes tenant satisfaction, and governance refers to transparency and compliance reporting.

Why does ESG matter for CRE investors?

ESG directly impacts property valuations, insurance costs, tenant demand, and regulatory compliance. Buildings with strong sustainability performance attract more capital, lease faster, and maintain more stable valuations over time.

How is climate risk affecting commercial real estate deals?

Climate hazards like flooding, wildfires, and extreme heat are raising insurance premiums and utility costs while shortening building system lifespans. Properties in climate-exposed locations may experience higher vacancy as tenants and insurers prioritize safer, more resilient buildings.

What ESG regulations apply to commercial real estate in 2026?

New York City's Local Law 97 requires emissions reductions, California's SB 253 and SB 261 mandate climate reporting, and the SEC's 2024 rule requires public CRE companies to disclose climate risks. These regulations are making sustainability data part of standard due diligence.

Do tenants care about ESG when leasing commercial space?

Yes—nearly 70% of major companies prioritize buildings that support their carbon-reduction goals. Tenants increasingly seek energy-efficient systems, lower utility costs, and transparent sustainability reporting during site selection.

How can brokers conduct ESG due diligence on a property?

Brokers should verify energy benchmarking data, assess climate hazard exposure, review insurance trends, and identify applicable regulations. Platforms like Crexi Intelligence provide centralized access to property data, ownership history, and risk factors to support thorough due diligence.