Net Zero Buildings: Unpacking the Journey for Commercial Real Estate
Sustainability is no longer just a marketing tagline for commercial real estate – it’s a fundamental component of future-proofing investments and ensuring the long-term viability of assets.
Among the many sustainability frameworks, acronyms, and targets out there, one concept has gained significant traction in recent years: net zero. By aiming to balance the amount of greenhouse gases emitted with the amount removed from the atmosphere, net zero is a bold goal that helps address climate change, stabilize operational costs, and enhance property values. Yet the path to net zero for real estate, made inherently complex by the technical realities of optimizing physical assets, is not always straightforward – particularly for those overseeing multiple buildings or an entire portfolio.
In this article, we’ll demystify net zero for commercial buildings, outline the steps and strategies needed to achieve meaningful emissions reductions, and explore how technology can streamline the process.
Understanding Net Zero
Net zero refers to a state in which the total amount of greenhouse gas emissions produced is offset by an equivalent amount of carbon removal or reduction. In practice, achieving net zero often involves a combination of reducing energy use, switching to renewable energy sources, and implementing offset measures to neutralize any remaining emissions. Although net zero may sound like a simple equation – emissions in, offsets out – there is a detailed and often complex set of actions required to get there, especially in commercial real estate.
For many real estate leaders, net zero initiatives understandably start with energy usage. Per the well-worn statistic, buildings today are responsible for nearly 40% of global emissions, with close to 70% of these emissions coming from electricity, heating, and cooling. By focusing on operational energy consumption first – measuring, monitoring, and ultimately reducing it – commercial properties can make a sizable dent in their carbon footprints. But going beyond incremental reductions to reach true net zero status typically requires more advanced strategies, including deep energy retrofits, onsite renewable power generation, and continuous, technology-driven optimization.
Given the scale and complexity of commercial real estate portfolios, reaching net zero entails more than a one-time project. It demands a holistic, iterative approach that factors in every aspect of building operations, from tenant behavior to maintenance protocols to building envelope efficiency. It’s not just a technical challenge; rather, net zero is a truly organizational endeavor that calls for alignment across sustainability, engineering, operations, asset management, and even occupants.
Why Net Zero Matters in Commercial Real Estate
Financial Resilience and Competitiveness
Net zero strategies can create a strong business case, leading to reduced utility costs, better tenant retention, and higher property valuations. With many tenants prioritizing ESG considerations in their leasing decisions, net zero buildings often command competitive lease terms and see improved occupancy rates. These properties also tend to be more resilient to utility price volatility. By reducing dependence on grid electricity and fossil fuels, owners and investors can hedge against unpredictable energy costs, thereby improving the predictability of operational budgets.
Regulatory Pressures and Policy Trends
Across major cities, regulations designed to curb building emissions are moving from voluntary to mandatory. Jurisdictions including New York City (Local Law 97), Washington, D.C. (Building Energy Performance Standards), and others are imposing increasingly stringent carbon reduction targets. This regulatory momentum is not confined to North America; across Europe, Asia, and Australia, similar policies incentivize (and in some cases mandate) net zero practices. Commercial real estate portfolios that proactively adapt to these requirements can mitigate compliance risks, avoid punitive fines, and maintain their competitiveness.
Stakeholder Expectations and ESG Goals
Investors, tenants, and the public are all placing greater emphasis on sustainability outcomes, with net zero emerging as a widely recognized benchmark of environmental leadership. CRE professionals who embed net zero principles within their ESG frameworks are able to showcase tangible progress to stakeholders. This is especially critical for investors seeking funds that align with the United Nations Sustainable Development Goals (SDGs) or the Principles for Responsible Investment (PRI). Achieving or committing to net zero also enhances a firm’s reputation, strengthens brand value, and can lead to higher rankings in sustainability indices, further driving investor confidence.
Key Steps on the Road to Net Zero
1. Establish a Baseline
The first step to achieving net zero is to determine where you currently stand. This involves energy audits, asset-level benchmarking, and robust data collection practices. By understanding which buildings in a portfolio have the highest energy intensity, you can prioritize efficiency projects where they will have the greatest impact. Digital platforms and building analytics tools (like those offered by Noda) can be invaluable in pulling real-time utility data, normalizing it for occupancy or weather, and providing actionable insights on how to optimize operations.
2. Develop a Holistic Strategy
Once you have a baseline, map out a clear strategy that outlines short, medium, and long-term goals. Consider frameworks such as the Science-Based Targets initiative (SBTi) to align your net zero roadmap with international climate goals. This plan should cover operational improvements, efficiency retrofits, renewable energy sourcing, and – if necessary – carbon offsets, but note that if you choose to pursue a science-based target for your organization, only a very limited amount of residual emissions can be offset in service of reaching your target. Stakeholder engagement across all levels is also crucial, from obtaining buy-in from C-Suite executives who hold the purse strings and can mobilize downstream departments, to collaborating with onsite facility managers and engineers who oversee equipment operations, to engaging with tenants who play a direct role in daily energy usage.
3. Improve Energy Efficiency
Efficiency comes first. Before deploying renewable energy solutions or investing in deep retrofits, prioritize strategies for reducing total energy consumption as much as possible. This could mean first pursuing programmatic operational improvements across your portfolio, then evaluating targeted efficiency upgrades (i.e. to HVAC systems, insulation, lighting, and BMS). Today’s advanced energy technologies that enable ongoing optimization and continuous commissioning can further drive efficiency and savings by mitigating operational drift and ensuring that equipment is used only when needed, and at the most optimal times. On the whole, prioritizing efficiency is generally the most cost-effective starting point for cutting emissions; after all, the greenest kilowatt-hour is the one you don’t consume.
4. Embrace Renewables and Electrification
After implementing efficiency measures, the next milestone is to adopt cleaner energy sources. Where possible, onsite renewable energy systems – like onsite solar on rooftops or parking lots – can significantly reduce reliance on grid power. For buildings where onsite generation isn’t feasible, power purchase agreements (PPAs) or community solar programs can help supply a portion of a building’s electricity. Furthermore, as the grid itself decarbonizes, electrification of conventional heating and cooling systems (e.g. replacing natural gas boilers with electric heat pumps, for instance) can greatly enhance a building’s net zero profile.
5. Utilize Offsets Sparingly
Even after maximizing efficiency and switching to renewable energy, some carbon emissions may remain. High quality offsets – like reforestation projects or renewable energy certificates (RECs) – can help neutralize those leftover emissions. However, offsets should be viewed as a bridge, not the final solution. Over-reliance on offsets can undermine the deeper operational changes and technology investments that are crucial for achieving genuine net zero. In general, It’s best to prioritize direct reductions and use offsets only to address emissions that are not yet technically or economically feasible to eliminate.
Technology’s Role in Accelerating Progress
Modern net zero strategies heavily leverage technology – from advanced analytics to fully automated building controls systems. Here are a few ways technology can aid you on your net zero journey:
Enhanced Forecasting, Tracking, and Reporting
As the familiar adage goes, “you can’t manage what you can’t measure.” One of the most transformative aspects of modern energy management platforms is their capacity to forecast and granularly report energy and emissions performance across an entire portfolio, based on the highly accurate data they aggregate from buildings and equipment. Not only can real estate teams use these platforms to directly track and forecast progress against reduction targets, including net zero target, but they can also support key regulatory reporting workflows by automating mandatory benchmarking submissions to ENERGY STAR and tracking compliance with relevant BPS policies.
By consolidating all relevant energy and utility bill data, these tools also, critically, can enable real estate professionals to conduct detailed planning for potential efficiency projects, helping asset management better forecast capital investments, estimate payback periods, and gauge potential impacts on net zero commitments. Once a project is implemented, the same platforms also frequently offer robust measurement and verification capabilities, providing clear insights into whether improvements are delivering on their promised savings and emissions reductions within a reasonable timeframe.
Beyond operations, leaders can tailor automated dashboards and reports to meet the specific needs of various stakeholders, from high-level executive briefings or investor updates to granular analysis for heads engineering. By leveraging these data-driven insights, organizations can make informed decisions, quickly identify underperforming sites, and demonstrate tangible progress in meeting sustainability targets across funds, regions, or the full portfolio.
Real-Time Analytics and Predictive Maintenance
Sophisticated monitoring platforms offer real-time insights into energy performance, carbon emissions, and even occupancy patterns. By collecting data at a granular level – down to individual pieces of equipment – these tools can identify anomalies, wasted consumption, and continuous improvement opportunities. For sustainability directors tasked with an entire portfolio, centralized dashboards can consolidate and aggregate building data for faster benchmarking and comparison, ultimately driving more strategic decision-making.
And the benefits aren’t just limited to those who sit at the top; building-level operators can benefit from automated alerting to spikes in energy consumption and potential equipment malfunctions, enabling faster remediation and minimizing wasted energy and emissions. Predictive maintenance, an offshoot of real-time analytics, can be especially helpful for lean engineering teams seeking to impact operations. Using sensor data and machine learning algorithms to forecast when building systems – like HVAC units or chillers – are likely to fail or require servicing, today’s energy platforms can aid site teams in flagging issues early and repairing equipment proactively, which in turn reduces energy waste and extends useful system life. These proactive interventions also minimize operational disruptions, a critical aspect of walking the line between improving energy efficiency and ensuring tenant comfort and satisfaction. By catching issues before they escalate, real estate professionals can avoid significant energy wastage and unplanned equipment downtime, both of which can hamper net zero targets and erode occupant comfort.
Automation and AI-Driven Optimization
Energy analytics platforms have come a long way from sending out an endless stream of alerts or telling engineers to turn the lights on and off. Today’s AI-driven solutions can work in tandem with building automation systems to dynamically adjust temperature setpoints, lighting levels, and ventilation rates based on actual occupancy, weather conditions, indoor temperature and air quality measures, and real-time grid signals. Some advanced platforms even shift energy-intensive processes to off-peak times, reducing both energy costs and carbon intensity. These advanced operational strategies not only help slash emissions but also enhance occupant comfort by ensuring that optimal indoor conditions are maintained.
Overcoming Common Challenges
Despite the understood benefits of net zero, commercial real estate professionals often encounter practical barriers to implementation along the way. These may include:
Capital Allocation
Technology upgrades, deep retrofits, and renewable projects can require upfront investment that is sometimes significant. Gaining access to capital – whether through internal budget approvals, green bonds, public rebate programs, or specialized financing – remains a hurdle for many. A solid business case is essential, as is the ability to communicate potential ROI, utility savings, and value enhancements. As noted above, today’s advanced energy analytics platform can support efficiency project planning and M&V after the fact.
Data Quality and Integration
A net zero roadmap depends on accurate, real-time data. For portfolio managers juggling dozens or even hundreds of properties, and potentially multiple siloed systems across the business, ensuring data consistency across disparate platforms can be challenging. Adopting standardized protocols (such as BACnet for building automation), taking a top-down, portfolio-wide view of technology platforms. (and consolidating tools where possible), and integrating systems through open APIs can streamline the data collection process, enabling greater transparency and more reliable data access for all who need it.
Stakeholder Engagement
For net zero initiatives to succeed, buy-in from everyone – sustainability, executive leadership, asset managers, building operators, and tenants – is paramount. Tenant engagement can be especially vital as occupant behavior can significantly impact energy consumption, from how HVAC settings are used to whether blinds are drawn on sunny days. Programs that incentivize tenants to adopt energy-efficient habits, or that involve them in sustainability initiatives, can make a tangible difference to overall performance.
Technological Complexity and Change Management
As buildings become more “intelligent,” the learning curve for facility management teams can grow. Onboarding staff to new software platforms, adopting automated controls, or applying AI-driven strategies demands training and comfort with cutting-edge technology. Organizations wishing to stay ahead of the curve should prioritize ongoing education and create clear processes for responding to the real-time data and insights these tools provide.
Measuring and Communicating Success
Once a net zero program is underway, measuring and reporting performance becomes a critical step. Common metrics include monthly and annual whole-building energy usage, carbon emissions (broken out by Scope 1/2/3), building ENERGY STAR scores, and real-time “percent renewable” indicators if onsite solar or PPAs are part of the strategy. Beyond these metrics, many organizations also track occupant satisfaction, wellness scores, and even productivity indicators, as there is increasing recognition of the link between sustainability and occupant well-being.
For portfolio-level reporting, standardized frameworks such as GRESB offer a standardized vehicle for benchmarking performance against industry peers and showcasing results to investors. Communicating successes – and being transparent about setbacks – helps build trust with investors, tenants, and regulatory bodies. Regular updates can also maintain momentum within the organization, motivating disparate teams to refine processes, collaborate more effectively, invest in new technologies, and keep raising the bar.
A good tool for driving engagement? Storytelling. Highlight how a specific building project drastically cut emissions, or how a tenant outreach program led to measurable behavioral changes that quantifiably reduced energy and carbon. Case studies, infographics, and publicly-shareable dashboards that help teams visualize real-time building performance can capture stakeholder attention more effectively than raw numbers alone. And the best part? If you already are in the habit of publishing an annual ESG report, much of the material you need likely exists already. It’s just a matter of reshaping it for your audience.
Beyond the Finish Line
The net zero journey for commercial buildings isn’t a one-time project or a fixed endpoint – it’s a continuous process of improvement that will evolve with emerging technologies, changing market conditions, and shifting stakeholder expectations over the longer time horizons of 10-20 years. For commercial real estate professionals tasked with overseeing sustainability, engineering, operations, and asset management, the path to net zero will require ambition, collaboration, and a willingness to continually adapt.
From establishing an accurate baseline and crafting compelling business cases for deploying advanced analytics platforms and targeted capital projects, each step in the journey hinges on an accurate foundation of data, deep building-level insight, and the ability to work cross-functionally to get the necessary inputs (and drive towards the right outputs). While all of this might sound daunting, the hard daily work of moving the needle incrementally towards net zero will ultimately bring real estate portfolios closer to a more resilient, efficient, profitable, and future-proofed operation.
By taking the methodical, data-driven approach outlined above, real estate professionals can transform their buildings into high-performance assets that minimize operating costs, attract savvy tenants, align with global environmental objectives, and stand out in a crowded market. The net zero vision may be ambitious, but with the right technology, partners, and strategies, it is well within reach for commercial buildings – both today and in the decades to come.
About Noda
Noda is a data and analytics company on a mission to make every building smarter, more efficient, and more sustainable. Recently ranked in the top 10 tech companies leading the charge on climate action, its AI-powered suite of products surface unique insights that empower real estate teams to reduce costs, decrease time spent on routine work, and find and act on opportunities to save energy and carbon. Discover how Noda's solutions can unlock the potential of your assets and accelerate the transition to net zero. Visit us at noda.ai to learn more.