The global push for green construction is facing a massive reality check as new data shows a cooling trend in the market. This article summarizes the 2025 RICS Sustainability Report to explain why the demand for green buildings has slowed down recently. Also, discover the challenges facing investors and what experts believe the future holds for sustainable real estate.
For years, the construction and real estate industries have been racing to meet high demand for sustainable buildings. However, recent data from the Royal Institution of Chartered Surveyors (RICS) suggests that this momentum has hit a speed bump. While sustainability remains a major topic of conversation, demand for green spaces has begun to level off or even decline in certain areas since 2025.
This shift is a major change from the rapid growth seen in the early 2020s. To understand where the industry is headed, we need to look at the specific data points and the economic factors that influence investor and developer decisions.
Key data from the 2025 RICS report
The 2025 RICS Sustainability Report shows a noticeable dip in market sentiment. According to the survey, about 30% of respondents worldwide reported that demand for green buildings has slowed compared with previous years. In some regions, such as Europe, the numbers are slightly more resilient, but the overall global trend points toward a cooling period.
One of the most telling statistics is the “green premium.” This is the extra amount that tenants or buyers are willing to pay for a sustainable building. The report indicates that while a premium still exists, it is shrinking. Investors are becoming more cautious about whether the high costs of green construction will yield strong returns in the current economy.
Factors contributing to the decline
Several factors are slowing the green building movement. The biggest challenge is the rising cost of materials and high interest rates. Construction projects are more expensive than they used to be, and developers are looking for ways to cut costs. Unfortunately, sustainable features like advanced HVAC systems or eco-friendly materials are often the first things to be trimmed from a budget.
Another issue is the lack of clear carbon measurement standards. Many investors are frustrated by greenwashing and the difficulty of proving that a building is actually sustainable. Without consistent carbon footprint data, it is hard for companies to justify additional spending to shareholders.
Regional variations and investor confidence
The slowdown is not happening at the same speed everywhere. Europe remains a leader in sustainability due to stringent government regulations that require companies to meet environmental standards. However, in North America and parts of Asia, the trend is more driven by market demand than by laws. In these areas, the decline in interest is more pronounced as investors await improved economic conditions.
Investor confidence has also been shaken by the “brown discount.” This is the loss in value that older, non-sustainable buildings face. Instead of rushing to build new green towers, many investors are choosing to stay on the sidelines to see how new regulations and energy costs will shake out over the next few years.
What this means for the AEC sector
Experts believe this trend does not mean that sustainability is going away. Instead, it means the industry is entering a phase of quality over quantity. Contractors and designers will need to find more cost-effective ways to integrate green technology without breaking the bank. The focus is shifting toward practical solutions that offer immediate energy savings rather than just earning a certificate for a wall.
For the real estate sector, this cooling period is a time to refine how we measure success. As carbon reporting becomes more accurate, demand may pick up again once investors have the data they need to feel confident.
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