Industry Corner: Smart real estate is reshaping investment strategy

Writer: Mirella Franzese

Industry corner is a monthly series on what company leaders believe are the most important best practices in their sector or organization to ensure growth and sustainable success.

October 2025 — Real estate developers pulled back in 2025 as higher interest rates, elevated material costs, and tighter funding created a fundamentally high-risk, low-reward environment. However, while investor appetite has cooled, the market has shown surprising adaptability and opportunity. In today’s volatile landscape — where many projects struggle to break ground — smart properties are delivering some of the highest returns on investment.

Environmental, social, and governance (ESG) practices are key for corporate responsibility as well as navigating an increasingly regulated market and catering to tenant demand. 

ESG models influence how real estate is valued. A 2022 EY case study found a 10% to 21% increase in market value for green buildings — roughly $29 to $61 per square foot in added value.

While property worth was once determined by square footage, location, or lease terms, it now hinges on adaptability, efficiency, and tenant satisfaction, according to national facility management provider ABM. From tech-enabled properties to energy-efficient construction and adaptive reuse projects, America’s largest real estate firms are pivoting to ESG to attract tenants, secure investments, and meet tighter regulations.

Asset refurbishment and renovation

“Sustainability is the biggest challenge the industry faces,” Gensler’s Nashville Office Co-managing Director Christopher Goggin told Invest:. “Buildings are responsible for about 40% of greenhouse gas emissions, so our role is critical.” 

For architecture and design firms like Gensler, tackling this challenge means reimagining underperforming assets into more sustainable, flexible, and experience-driven places. 

“There’s definitely a trend here,” said Goggin. “With so many undervalued properties on the market, new opportunities are opening up for owners and developers.”

Those opportunities extend well beyond U.S. markets. Globally, asset refurbishment and renovation are expected to be the largest area of investment for real estate investors over the next three years, according to a recent JLL report.

Still, there are challenges associated with assessing the best fit for a property considered for conversation. “We have to consider the entire urban context: what makes the place work, what the experience is like, and what synergies are possible,” added Goggin.

Tech-driven investments

AI and digital tools now streamline development, synthesize market data and intelligence, and facilitate regulatory reporting — giving investors the insights they need to make smarter, more informed decisions market by market.

“Technology, particularly AI, is becoming embedded in every part of real estate,” Lisa Maki, principal and managing director of Avison Young’s Nashville office, told Invest:. 

For Joseph & Joseph Architects’ sustainability director and Nashville office lead, Danny Ruberg, AI-integrated projects go hand in hand with sustainability. Advanced 3D scanning technology allows for more precise and efficient measurements, supporting environmentally informed decision-making. “Many of these tools help us analyze sustainability metrics and environmental data, everything from siting a building to understanding its form and performance,” Ruberg told Invest:. “That data guides our design decisions and helps us optimize for sustainability … (helping) us deliver better project outcomes.”

Cost-saving advantages

According to global technology leader ABB, energy is one of the biggest operating costs for buildings, typically accounting for as much as 40% to 50% of total expenses in commercial properties. Smart buildings can cut those costs down by up to 17% through automation, electrification, and energy monitoring. 

Investments in smart systems allow developers to monitor energy usage in real time while collecting data needed for ESG reporting. These upgrades reduce utility bills, eliminate waste, and predict performance more accurately — all while creating long-term property value. 

Leadership in Energy and Environmental Design (LEED)-certified properties — those designed, constructed, and operated to high environmental standards —  can command rents more than 37% higher in major U.S. cities, according to proptech platform ProptechOs. Sustainable practices don’t have to be complex either. For Parmenter Realty Partners, some of the biggest efficiency gains have come from simple upgrades to lighting, HVAC, and water systems, which are intrinsically valued by tenants, according to Parmenter Realty Partners CEO John Davidson.

Tenant retention

Properties equipped with advanced automation systems charge rental premiums 15% to 20% above average, boosting overall valuation. JLL estimates that overall property value can rise by as much as 21% in projects that integrate property technology. 

Beyond pricing, smart technologies improve tenant satisfaction, leading to longer-term leases and stronger cash flows. A 2025 Georgetown University study found that “greener buildings have a distinct edge in attracting premium tenants.” 

According to JLL research, one in two investors are now willing to fund sustainable buildings to ensure adequate supply. “Occupiers are now more willing to put their money where their mouth is,” said Kamya Miglani, director of corporate solutions research for JLL Asia Pacific, in a report. “The majority will pay to go greener when approaching new tenancy agreements.”

Regulatory and compliance advantage

Beyond attracting tenants, sustainability eases regulatory pressures, which remains a heavy burden on labor and resources. Automation on the compliance front can significantly reduce those costs by streamlining scanning, assessments, and reporting. In one case study, automated systems led to a 40% reduction in full-time equivalent staff requirements, freeing employees to focus on higher-value strategic work. 

“An efficient process is inherently more sustainable because it saves our clients money and conserves resources,” said Aran McCarthy, president of the full-service architectural and design firm, FCArchitects, in a conversation with Invest:.

Tech-driven processes also improve accountability, helping mitigate regulatory risk. As the U.S. government enacts stricter environmental standards, buildings that fail to comply face financial liabilities, higher vacancy rates, and reduced access to capital, as cited by ABB. Developers that integrate compliance into their core operations gain a competitive advantage and differentiator rather than an added cost.

Climate considerations 

As a result, sustainable development momentum is growing. “Resilience, sustainability, and climate change have become major priorities over the past decade,” said Andrew Thompson, president of the American Institute of Architects in New Jersey, to Invest:. 

Natural disasters have changed the narrative, Thompson noted. “These issues became central to architectural discourse.” Across the country, environmental vulnerabilities are pushing clients to prioritize resilience and flood mitigation.

Challenges ahead

Many real estate firms in the commercial and residential space are facing growing pressures to decarbonize building stock and to justify the financial overheads of green building investments. And given the mounting challenges of an uncertain marketplace, implementation is a challenge. “Some assets naturally lend themselves to higher efficiency, so it’s not always a level playing field,” explained Davidson to Invest:. 

He added that many tenants still underestimate the return on sustainability investments. “We don’t see tenants prioritizing sustainability as much as they did five or six years ago,” Davidson said. “Today, the top concern for most tenants is the size and configuration of their space, followed by amenities.”

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