Australian commercial property investors are rapidly overhauling their portfolios to meet net-zero targets and unlock value through ESG strategies, amid intensifying pressure from regulators, tenants and shareholders.
According to Knight Frank’s ESG Property Investor Survey 2025, 92 per cent of investors with Australian holdings cite internal net zero goals as their primary driver, while 75 per cent highlight shareholder expectations and improved financial performance as key motivators.
The survey, which canvassed 40 global investors managing a combined £300 billion in assets, illustrates a shift in investor mindset as ESG considerations become central to acquisition and operational strategies, according to Knight Frank Australia Head of ESG Jenine Cranston.
Knight Frank’s latest (Y)OUR SPACE report found that 67 per cent of corporate respondents had a net zero carbon emissions target for their business, and the real estate they occupy plays a significant role in meeting these goals.
“There is a fast-growing body of occupiers who are now looking for buildings that do well on sustainability as it helps them to meet their own green targets,” Ms Cranston said.
Regulators Turn Up the Heat on ESG Compliance
The introduction of mandatory sustainability reporting from 1 January 2025 has also sharpened investor focus on ESG compliance.
The new reporting regime requires large corporations and asset managers to disclose climate-related risks, strategy, governance practices and emissions targets — placing ESG transparency squarely in the spotlight.
Disclosure obligations and reporting standards are now influencing strategy for 67 per cent of Australian investors, alongside mounting pressure from capital markets and occupiers.
“Growing mandatory sustainability requirements from governments, both in Australia and overseas, is a key motivating factor,” Ms Cranston said.
Eco Upgrades Surge as Investors Eye Exit Value
The survey revealed that Australian investors are increasingly turning to retrofitting and refurbishment to improve ESG performance and enhance asset value.
Eighty-three per cent of Australian respondents say they are actively retrofitting existing properties.
The most commonly cited motivations include achieving higher environmental certifications (75 per cent), generating stronger rental income (67 per cent), and increasing exit value (58 per cent).
About 75 per cent are also targeting underperforming ESG assets for acquisition and repositioning — a strategy aimed at unlocking value through sustainable upgrades.
“There is strong demand from capital for properties with solid ESG credentials, as these assets attract tenants and result in better occupancy rates and higher rents,” Ms Cranston said.
“When it comes time to sell, there will be a wider pool of buyers for an asset that ticks the boxes on this front — and our ‘Active Capital’ research shows these assets are more likely to achieve a better sale price.”
