Wednesday, 21 October 2026
Europe’s commercial real estate industry faces growing financial challenges as rising global temperatures, changing energy requirements and the need to modernise ageing buildings become increasingly important considerations for property investors. The latest assessment from the United Nations Environment Programme, published on 21 October 2026, estimates that current government policies could result in global temperatures increasing by approximately 2.8°C above pre-industrial levels by 2100. Even if countries fully implement their existing climate commitments, the projected increase remains around 2.6°C, highlighting the considerable difference between international environmental objectives and the measures currently expected to achieve them.
The UN findings come as global emissions remain close to historic highs. Although total greenhouse gas emissions declined marginally in 2025, emissions associated with fossil fuel consumption continued increasing. The United States recorded higher energy-related emissions, partly because of increased electricity generation from coal. According to the UN assessment, limiting the extent of future warming would require substantially faster reductions in global emissions. Its lowest-overshoot pathway calls for reductions of approximately 18% by 2030, 45% by 2035 and 69% by 2040 compared with 2025 levels. These figures describe the reductions necessary under an ambitious climate scenario rather than outcomes already secured by existing government commitments.
The buildings sector is particularly relevant because of the energy required to operate properties and the emissions generated during construction. Separate UN Environment Programme research published in May 2026 estimated that operating buildings produced approximately 9.9 billion tonnes of carbon dioxide in 2024, representing an annual increase of around 1%. The organisation also identified a global investment requirement of approximately US$5.9 trillion for building energy efficiency by 2030. These estimates include residential and commercial properties worldwide, but they demonstrate the scale of the challenge facing building owners, developers and governments seeking to reduce energy consumption and improve environmental performance.
For European commercial property investors, the financial implications are already becoming apparent through legislation adopted independently of the latest UN report. The revised Energy Performance of Buildings Directive requires EU member states to introduce national standards addressing inefficient non-residential buildings. By 2030, national performance thresholds will target the segment representing the worst-performing 16% of non-residential building stock, with a further threshold covering the worst-performing 26% by 2033. The directive allows specified exemptions and requires national implementation, meaning the precise obligations facing individual properties will depend on their location, energy performance and applicable domestic regulations.
These requirements are relevant to commercial property markets across Central and Eastern Europe, including Poland, Czechia, Slovakia, Romania and Hungary. Many offices, shopping centres, hotels and industrial facilities were constructed during periods when energy costs, technical standards and occupier expectations differed from those prevailing today. Owners assessing older buildings may need to consider expenditure on heating and cooling systems, ventilation, insulation and energy management technology. Such investment can improve operational efficiency, but the financial justification will depend on the property’s condition, potential rental income, occupancy levels and the cost of carrying out the improvements.
The increasing importance of environmental performance is also influencing how investors assess buildings. The Carbon Risk Real Estate Monitor provides methodologies for comparing the emissions performance of different property types with long-term reduction pathways. Its assessments cover offices, retail buildings, logistics facilities, hotels and other commercial assets, allowing investors to identify potential exposure to future changes in energy requirements and market expectations. However, a building performing above a particular emissions pathway is not automatically legally non-compliant or financially unviable. Property values remain influenced by numerous factors, including tenant demand, lease agreements, operating costs, financing conditions and the expenditure required to maintain or upgrade an asset.
Beyond energy efficiency, the physical effects of climate change create another consideration for property ownership. Higher temperatures can increase cooling requirements, while flooding and severe weather may affect buildings, transport connections and essential infrastructure. The consequences vary significantly between locations and property types. Logistics facilities may need to assess drainage, roof performance and operational continuity, while offices, shopping centres and hotels may face greater demand for cooling during prolonged periods of high temperatures. These exposures can influence maintenance and investment decisions, although the latest UN report does not quantify their effect on commercial property valuations or insurance premiums in individual European markets.
Developers also face decisions concerning the environmental consequences of constructing new properties compared with upgrading existing buildings. While modern developments can offer improved operational efficiency, construction generates emissions through the manufacture and transportation of materials, particularly cement and steel. Refurbishing an existing property may avoid some of these emissions, but older buildings can present technical limitations that make substantial improvements expensive or impractical. Evaluating the alternatives therefore requires consideration of construction-related emissions, future energy consumption, building lifespan and financial feasibility rather than assuming that either new development or refurbishment is always preferable.
For institutional investors, these developments add further complexity to acquisition and asset management strategies. A property with inefficient technical systems may require additional capital expenditure, while buildings exposed to flooding or extreme heat may need protective improvements. Nevertheless, there is insufficient evidence to conclude that the latest UN temperature projections will directly cause a measurable decline in European commercial property values. Investment performance will continue to depend on individual building characteristics and local market conditions. Similarly, stronger environmental performance may improve a property’s competitive position without necessarily guaranteeing higher rents or investment returns.
The latest UN assessment reinforces the importance of incorporating energy consumption, refurbishment requirements and physical climate exposure into long-term property investment decisions. For Central and Eastern Europe’s commercial real estate industry, the immediate challenge is to understand how existing European regulations, national implementation measures and changing operational requirements will affect the cost of owning and maintaining buildings. While the precise financial consequences remain dependent on individual assets, the ability to assess and manage environmental risks is becoming an increasingly important consideration in determining the long-term competitiveness of commercial property portfolios.
