Building the future: The property sector’s role in creating sustainable cities

The property investment industry has a major role to play in creating more sustainable cities, with the value and longevity of property assets increasingly linked to their environmental footprint, according to Bruce Precious, Principal Consultant at Six Capitals Consulting, who spoke about sustainable cities at the PFA 2025 Conference on the Gold Coast.

“The generation and maintenance of wealth in property is related directly to the success of the cities in which they’re located. And successful cities will need to be sustainable cities over the long term”, he said.

The property sector has a special role to play given the time horizons involved in building, operating and leasing commercial property.

“Think about the bricks and mortar nature of property and the fact it’s resilient and enduring and is maintained over time. There’s not many sectors of our economy where products of 100 years old or more can still be maintained as premium end of the market products. 

“That gives the property sector a different dimension regarding time horizons. Today, you could be signing leases with durations of 10 years plus the option for 10 more. So we’re signing leases today that may run to 2040 and beyond.

“That we’re in a period of such extraordinary change, in just two lease cycles, is a mind-blowing proposition.”

But while buildings endure, nature works on timelines that dwarf human planning. “When we think about the environment in which we operate and nature’s time cycles, then we’ve got to recalibrate a little bit”, Precious said.

“Carbon dioxide emitted today – say, from firing up a gas boiler in a Melbourne building – the best data I’ve seen suggests it takes about 100 years to sequester a third of that CO2 back into natural systems. The next third takes around 1,000 years, and then there’s still a residual.”

Why sustainable cities are crucial

Cities are now home to 4.4 billion people globally, and by 2050 that figure is estimated to grow to 6.8 billion. That’s the equivalent of adding 95 million urban residents every year for 25 years. This can be a positive, as Precious quotes Ed Glaeser in Triumph of the City: “Cities are humankind’s greatest invention. They make us richer, greener, smarter, healthier and happier.”

Yet cities only succeed if they function sustainably. The buildings that form their core elements must reduce emissions, operate efficiently, and support human and ecological wellbeing.

“Sustainability is hard to define,” Precious notes. “But operating unsustainably can be easier to describe, and that’s where we are today, our current state.

“We are currently in huge trade deficit with the natural environment. Eventually, nature will start to charge tariffs for this trade deficit, and nature will charge it in really profound and difficult ways to deal with. 

“When we don’t have clean air to breath or clean water to drink, we pay considerably in health impacts and then we pay more to clean up and restore healthy systems on which we rely.”

The regulatory push is underway

Policy is starting to shape the path forward. From January 2025, large Australian companies will be required to disclose both their emissions and climate transition plans as part of financial reporting.

In addition, there is development in sustainable finance taxonomies on the way, defining what constitutes a ‘green’ investment, and there are ambitious public sector targets. “The Australian Public Service has a net zero target by 2030. One of the easiest ways for them to achieve a large part of that target would be leasing net zero buildings.”

The Victorian government recently released a regulatory impact statement on their gas substitution plan, to electrify gas appliances and infrastructure. And the New South Wales government released a policy for their own operations to reach net zero, which includes new leases for office buildings must be at least five-and-a-half stars from the middle of 2026, and six stars from 2030. 

“From the first of July 2026, NSW will preference all electric buildings, and by 2035 all office buildings owned or leased must be all electric. So the writing is on the wall regarding increasing tenant demand that buildings are all electric.”

The path to net zero buildings

Precious said the opportunity is to plan for any portfolio or buildings to be net zero at the earliest opportunity. “I think that places you best to take advantage of this changing market and avoid being filtered out by tenants who are looking for better performing all-electric buildings, or by being filtered out by investors.” 

Precious outlines seven immediate actions that property owners and managers can take to align with the future:

1. Boost energy efficiency – with major benefits for operational expenditure.
2. Use renewable electricity – “Whether that’s on site generation, or purchased through the grid, it’s something we can do today.”
3. Electrify buildings – replace gas systems with electric ones.
4. Phase out synthetic refrigerants – “Limiting or eliminating synthetic, global warming refrigerants is a big pollution problem that we need to address.”
5. Purchase carbon offsets – for residual emissions, for example investing in nature-based solutions like reforestation and restoring some of that trade deficit.
6. Engage suppliers and tenants – help them pursue their own sustainability goals.
7. Plan for physical climate impacts – Adapt assets for resilience in a harsher environment.

Importantly, many of these steps are technically and financially viable today. “If we imagine what a future net zero city looks like, it will have buildings are energy-efficient and run on renewable electricity. Both things we can do right now.”

Leadership and legacy

Australia’s commercial property industry has proven itself capable of global leadership in managing  sustainability. Many local companies consistently rank atop international sustainability benchmarks such as GRESB (Global Real Estate Sustainability Benchmark) and the Dow Jones Sustainability Index.

“Many of Australia’s leading property companies are already acknowledged globally as dealing with sustainability better than many other real estate companies benchmarked around the world.

“We’ve built a cluster of excellence around commercial property, and we can continue to leverage that excellence”, Precious concluded.

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