ESG compliance is becoming a determining factor in whether commercial buildings can attract finance, tenants and investment across Europe, but the industry has yet to develop consistent ways to price or act on it with confidence.
That is the central finding of a new sentiment report published by SIOR Europe and the University of the Built Environment, based on a survey and interviews with SIOR members, comprising senior real estate professionals across Europe.
The report highlights several trends shaping European commercial real estate:
- ESG as a market gatekeeper – increasingly determining access to finance, occupiers and investment decisions.
- Limited ESG premiums – 67 percent of respondents estimate premiums at below 10 percent despite compliance increasingly being required.
- Growing stranded asset risk – buildings unable to transition to higher ESG standards may become difficult to finance, lease or sell.
- Unclear expectations – only 44 percent of respondents say ESG requirements are clearly defined.
- Uneven AI adoption – early adopters are gaining efficiency advantages while others remain cautious due to credibility and governance concerns.
ESG reshaping investment and leasing decisions
The research finds that ESG has shifted from a reputational consideration to a practical determinant of access to finance, occupier demand and long-term asset viability. Demand and capital are concentrating on a narrower band of future-proofed buildings, while weaker stock faces rising exit risk regardless of income generation.
Almost half of survey respondents (48 percent) report that ESG issues come up regularly in their day-to-day work, and an equal proportion say clients increasingly request ESG data on potential properties.
Yet confidence in translating these requirements into clear client advice remains limited. Only 44 percent of members say ESG needs are clearly defined, with 37 percent describing them as unclear and 19 percent saying they are not clear at all.
Most members (67 percent) estimate ESG premiums at below 10 percent compared with similar non-compliant buildings. While ESG compliance is widely seen as essential for finance and leasing, it is not yet consistently reflected in pricing.
The report also identifies a growing risk of stranded assets, particularly for buildings that cannot credibly transition toward higher ESG standards. In some markets, exit risk is already visible in leasing negotiations, with tenants in low EPC-rated space finding their ability to assign or sublet restricted by regulatory constraints. The research warns that this risk is not yet sufficiently reflected in valuations.
The greatest resistance to ESG progress is perceived to come from asset owners (37 percent of respondents), followed by occupiers (19 percent), who point to a persistent misalignment of incentives. ESG-related expenditure is often viewed by landlords as unrecoverable and by tenants as an operational burden rather than a lease benefit.
Matthew Leguen de Lacroix, Head of Business Development EMEA at SIOR: “What we are seeing across Europe is a structural shift rather than a short-term cycle where ESG considerations increasingly determine whether buildings can attract finance, tenants and investment. This is accelerating the divide between future-proofed assets and those that may struggle to remain competitive. The insights also uncovered call for more clarity, consistency and parity in how ESG is applied in the commercial real estate market. We aim to work with our members, who are on the front line of these changes, alongside other professional real estate bodies to achieve this.”
AI adoption creates a further divide
The report also examines the integration of artificial intelligence across European real estate markets. Adoption remains uneven. Members in London, Poland and Latvia are among the furthest ahead, while markets in Western and Southern Europe remain more cautious.
The most frequently cited concerns include credibility risk, where clients recognise low effort AI-generated material and question the professional judgement behind it, alongside data governance risks and the potential over reliance on automated outputs among junior staff.
David Hunt, Senior Lecturer at the University of the Built Environment, said: “This research harnesses the real-time, experience-based insights of SIOR members across Europe, all senior real estate advisors, making the report timely and relevant, rather than theoretical or retrospective. It highlights just how uneven the pace of change is across European real estate markets. ESG expectations are rising quickly, but the industry is still working out how to translate those requirements into clear pricing signals and investment decisions.
“Artificial intelligence is also developing at different speeds depending on market structure, data availability and firm capability. The opportunity lies in using these tools to support better decision making rather than replacing the professional expertise that underpins the sector.”
The report concludes that European real estate markets are entering a quality reset, where asset performance will increasingly depend on ESG compliance, data transparency and professional capability.
