Author: Dan Hill, National Director – Commercial Valuations
Sustainability is no longer a buzzword - it’s now one of the most powerful forces reshaping the retail property sector. For shopping centres in particular, Environmental, Social, and Governance (ESG) pressures are coming from every direction: regulators, investors, tenants and consumers.
For landlords and investors, the shift raises a critical question: how can retail assets remain competitive in a market where green credentials and social value are just as important as location and foot traffic? Opteon’s commercial property valuers are seeing first-hand how ESG compliance is increasingly influencing property values, tenant demand and long-term investment strategies.
Institutional investors now demand strong ESG reporting across their property portfolios. Assets that can demonstrate sustainability credentials are more attractive, offering both reputational benefits and reduced long-term risk.
Retailers themselves are under pressure to operate sustainably, from global fashion chains committing to net zero to supermarkets eliminating single-use plastics. Tenants want spaces that align with their brand values, while consumers are increasingly choosing shopping environments that reflect their own sustainability priorities.
Governments in both Australia and New Zealand are tightening building performance standards, with Green Star, NABERS, and NZ Green Building Council certifications becoming benchmarks. In future, non-compliant assets risk obsolescence and financial penalties.
Energy use, carbon emissions, and resource efficiency are at the heart of environmental sustainability in retail property. Shopping centres are particularly energy-intensive due to lighting, heating, cooling, and extended trading hours.
Green Building Certifications: Properties with NABERS or Green Star ratings often attract higher rents and lower vacancies, thanks to reduced operating costs. Sustainability is at the core of modern shopping centres through incorporation of recycled constructions materials, upgrading of energy management platforms, solar panels, low flow water fixtures, roof top gardens or green architecture.
Renewable Energy: Solar rooftop installations, once considered a “nice to have,” are now a mainstream investment strategy. Vicinity Centres, for instance, has rolled out one of Australia’s largest shopping centre solar programs.
EV Charging Infrastructure: With electric vehicle adoption accelerating, landlords adding charging stations are positioning their centres as future-ready destinations.
From a specialist real estate perspective, these measures directly influence valuations. Energy-efficient assets often see sharper yields and are less vulnerable to the “brown discount” that drags down poorly performing buildings.
ESG is not just about the environment; the “S” for Social is increasingly relevant in retail property. Rather than transactional spaces, shopping centres are fast becoming community hubs.
Inclusivity and Accessibility: Tenancies designed for accessibility ensure all members of the community feel welcome.
Community Engagement: Hosting events, farmer’s markets or cultural celebrations fosters loyalty and positions centres as essential conductors of collaboration.
Wellbeing and Design: Features like natural light, ventilation, digital directories and signage green spaces and comfortable public amenities improve customer experience and tenant satisfaction.
For investors and developers, this means longer lease terms and a tenant mix better aligned with future demand.
The Governance pillar of ESG is often overlooked, but it’s becoming a cornerstone of retail property investment.
Transparency: Investors and lenders increasingly require clear ESG disclosure. Benchmarks like GRESB (Global ESG Benchmark for Real Assets) measure and compare sustainability performance.
Risk Management: Governance practices that monitor and mitigate climate, social, and regulatory risks are tied directly to asset resilience.
Financing Advantages: Green loans and sustainability-linked financing options provide a cost of capital advantage to compliant assets.
As a commercial property valuer, I can confirm that strong governance frameworks often correlate with enhanced investor confidence and reduced valuation risk.
Sustainability is not just good for the planet, but a key value driver in retail real estate.
Premium Rents: ESG-aligned shopping centres often attract premium rents due to lower operational costs and strong tenant demand.
Lower Vacancy Risk: Sustainable, community-focused centres are better positioned to weather economic downturns.
Capital Value Impacts: Non-compliant assets are increasingly subject to “brown discounts,” where valuations decline due to higher running costs, regulatory risk, and tenant flight.
From our perspective, ESG has shifted from being a “soft” factor to a hard metric in valuations. The Australian Property Institute have introduced a 'Sustainability - ESG for the Valuation Profession' CPD module, designed specifically to address the practicalities of reporting and sourcing evidence of Environmental, Social, and Governance (ESG) factors in line with the International Valuation Standards (IVS).
Vicinity Centres (Australia): Rolling out rooftop solar installations across multiple assets, with significant reductions in energy costs and emissions.
Simon Property Group (NYSE:SPG): S&P 100 100 company focussing on across North America, Europe and Asia with a vision to lead the way in sustainable retail real estate development and operations.
NZ Retail Developments: New Green Star–certified retail hubs in Auckland and Wellington showcase the market shift toward sustainable design and operations.
International Benchmarks: Leading global centres are experimenting with circular economy principles - from fashion recycling schemes to zero-waste dining precincts.
These examples highlight the competitive edge gained by landlords who embrace sustainability early.
Looking ahead, ESG pressures will only intensify:
Net Zero Commitments: Expect growing numbers of retail landlords committing to carbon-neutral portfolios.
Smart Technology: AI-driven energy management will make buildings more responsive and efficient.
Tenant Partnerships: Retailers and landlords will collaborate more closely on shared sustainability goals, from waste reduction to renewable procurement.
Sustainability is no longer an emerging matter for retail property. It’s central to value, risk, and opportunity. ESG considerations now influence everything from tenant demand to financing options and long-term asset performance.
Leading Opteon’s commercial property and specialist real estate valuation teams, I see ESG as one of the most significant factors shaping the retail property market today. Shopping centres that lead in sustainability will secure tenant loyalty, investor confidence, and stronger valuations. Those that fail to adapt risk being left behind.
Dan has circa 20 years of property experience having started his valuation career valuing residential property, before moving to the Commercial Division of Opteon (Western Australia) in 2009. In 2014, Dan became a Director of Opteon (Western Australia), the firm’s youngest ever equity partner.
Following the formation of Opteon’s Specialised Real Estate division, Dan was appointed National Director- Specialised Real Estate. Dan is now our National Director of Commercial Valuations, committed to his own professional excellence, and that of our entire commercial team.
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This article is produced by Opteon Property Group Pty Ltd. It is intended to provide general information in summary form on valuation related topics, current at the time of first publication. The contents do not constitute advice and should not be relied upon as such. Formal advice should be sought in particular matters. Opteon’s valuers are qualified, experienced and certified to provide market value valuations of your property. Opteon does not provide accounting, specialist tax or financial advice.
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