Energy inefficiency hits real estate values. German commercial real estate institutional investors are warning that energy inefficiency has already triggered significant valuation collapses and threatens to consume up to half of some portfolios within five years.
New research from re:sustain, based on a survey of 30 leading German commercial real estate fund managers, reveals a sector in the midst of a radical strategic pivot. As traditional retrofits prove too slow and disruptive, managers are aggressively shifting capital toward remote-optimisation technologies to protect asset values.
The valuation cliff
The research shows that all German fund managers have stranded assets in their portfolios – those that no longer meet minimum energy efficiency standards or investor ESG requirements – and have seen their values plummet. Specifically, 70% of managers witnessed falls of between 11% and 30%, while 23% reported even more severe devaluations of 31% to 40% over the past three years.
The outlook for those who fail to act is equally bleak. Four fifths (80%) of respondents expect their volume of stranded assets to increase by up to 25% over the next five years if energy efficiency is not addressed immediately.
A shift in strategy: Tech over timber
While the scale of the challenge is vast, the industry’s response is narrowing towards high-impact technological solutions. Faced with the reality of climate regulations and tenant demand for green space, 48% of managers plan to modernise HVAC systems, while 45% are set to invest in new Building Management Systems (BMS). Notably, the crisis is so great that 52% are considering demolishing poorly performing buildings entirely.
However, the golden bullet for the industry is increasingly viewed as digital rather than physical. The research revealed that 73% of fund managers believe that investment in new building management systems – a computer-based control system that monitors and manages a building’s mechanical and electrical equipment, followed by the introduction of technology capable of optimising building systems remotely (67%) will have the greatest impact on tackling energy efficiency. This outperformed more traditional capital-intensive measures, such as installing new lighting or HVAC hardware (53%).
“The commercial real estate sector has reached a tipping point where energy performance is no longer a ‘nice to have’ but a fundamental driver of liquidity and valuation,” said Katie Whipp, Chief Business Officer at re:sustain. “The research shows that managers are moving away from the slow-burn of traditional construction retrofits in favour of agile, data-led interventions. They are looking for quick results that protect asset value without the prohibitive capex of a structural overhaul.”
Barriers to improvement
Despite the clear financial incentive, the path to Net Zero remains fraught with operational hurdles. When asked to identify the top challenges to improving energy consumption, 83% of managers cited the operational disruption caused by significant physical retrofits as a primary barrier.
Furthermore, the industry is grappling with data silos. Over two thirds (77%) of respondents noted that critical energy data remains trapped in disconnected, legacy systems, preventing a portfolio-wide view of performance. Half of respondents (50%) also expressed concern over security risks associated with introducing new smart energy solutions.
The rise of the “PropTech” budget
As a result of these challenges, technology has moved from the periphery to the core of the investment committee. The majority (93%) of German fund managers now describe technology as an “important” part of their strategy, with 23% of these categorising it as “highly important.”
Investment appetite is following suit. Almost three quarters (84%) of respondents expect their technology expenditure on energy efficiency to increase over the next three years, with 17% predicting a “dramatic” spike in spending. The primary drivers for this digital gold rush are the speed of results compared to physical upgrades and the lower capital expenditure required to achieve compliance.
The proprietary re:sustain engine processes the digital twin data and the BMS data to identify inefficiencies and improvement opportunities, whilst calculating potential carbon savings. This remote approach allows for targeted optimisations and detailed mechanical insights on existing systems, reducing energy use, carbon emissions, and operational costs in support of sustainability goals—all without requiring Capex from asset owners or business interruption for occupiers.
To date, buildings using re:sustain technology have enjoyed 37% average annual energy savings in a process that takes just four to six weeks to implement.
Methodology
Research conducted by Pure Profile in February 2026 with 30 German respondents working for pension funds, insurance asset managers, asset managers and investment banks that invest in European commercial real estate assets who are actively involved in managing /running the commercial real estate portfolio of the organisation they work for.
re:sustain, headquartered in London but operating globally, was founded in 2021 by scientists who recognised that while data was being collected about real estate energy consumption, it wasn’t improving usage. To solve this problem, the re:sustain team developed innovative technology which uses collected building management system data (BMS) to create a highly calibrated digital twin of each building – an accurate model that reflects real asset performance. This dynamic thermal model allows for precise simulations and analyses, eliminating guesswork and enabling targeted interventions. re:sustain’s proprietary science-based technology platform optimises the energy consumption of real estate assets through remote interventions, saving energy, cost and CO2, without Capex or business interruption.
To date, buildings using re:sustain technology have enjoyed 37% average annual energy savings in a process that takes just four to six weeks to implement.
