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In today’s high-stakes real estate landscape, capital expenditure decisions are no longer just about maintaining buildings; they’re about futureproofing portfolios. Asset managers face mounting pressure from regulatory frameworks, sustainability targets, and evolving tenant expectations, all while trying to deliver consistent returns.

At a recent PropTech Connect roundtable we co-hosted, senior leaders from across the industry revealed how forward-thinking firms are transforming their CapEx strategies into levers for long-term value creation.

From aligning lease terms with retrofit timelines to adopting smarter financial metrics that go beyond payback periods, the conversation made one thing clear: success lies in a more collaborative, data-driven, and tenant-centric approach.

Whether it’s embedding green clauses in contracts or investing in real-time energy dashboards, asset managers who integrate financial insight with operational intelligence are setting a new standard for resilient, high-performing real estate portfolios.

We’ve made our takeaways available to you to help make your approach to CapEx more proactive and strategic.

Align CapEx improvements with lease events

“Your lease has to match your CapEx strategy so that whatever you’re trying to achieve through expenditure is matched in those contracts you put in place with your occupiers.”
— Paul O’Grady, Director of Asset Management Canary Wharf Group

Integrating CapEx goals into lease terms

One of the prominent themes was the importance of leveraging lease events – natural points in the leasing cycle (such as renewals, extensions, or new tenant move-ins) – to advance CapEx objectives. Aligning lease agreements with capital improvement plans ensures that investments in building upgrades translate into tangible performance gains and value creation.

By embedding sustainability and efficiency clauses into leases (often termed “green lease” provisions), asset managers can align incentives. For example, a building owner investing in an HVAC modernization or solar installation might negotiate a slightly higher rent or a cost-sharing mechanism in return for lower tenant energy bills. This way, the tenant benefits from reduced operating costs and improved comfort, while the landlord enhances the property’s energy performance and value.

Timing upgrades with lease cycles

Lease expiration or renewal is an opportunity to undertake disruptive retrofits and upgrades with minimal inconvenience to tenants. Several roundtable participants noted they plan significant CapEx projects (like deep energy retrofits or major refurbishments) to occur when a space becomes vacant or during a renewal negotiation, as it’s easier to implement changes at those junctures. Coordinating CapEx timing with lease events can also strengthen the landlord’s negotiating position – a modern, efficient building is more attractive to tenants, potentially justifying longer lease commitments or higher rents.

Jonathan Avery of Legal and General IM gave a compelling example where a recent negotiation where tenants co-funded HVAC upgrades in exchange for lease extensions, resulting in a “win-win that reduced our CapEx burden by 30%”. In this case, leveraging the lease renewal event allowed the landlord to improve the building at a lower net cost, while the tenant secured a better environment and a longer tenancy.

“It’s definitely an opportunity for a well organised, well run landlord to really stand out and shoulders above everyone else.”
— Hugh White, Head of National Investment, BNP Paribas Real Estate

Tenant engagement is key

“23% of our efficiency upgrades underperform because tenants override HVAC settings or leave windows open in winter.”
— Paul O’Grady, Canary Wharf Group

Tenant engagement was repeatedly cited as a critical success factor for achieving the desired outcomes from CapEx investments in building improvements. Even if a building has smart heating/cooling systems, a single tenant consistently propping open doors or misusing controls can negate energy savings. In industrial properties, the engagement gap is even wider.

“Only a fraction of warehouse tenants engage with our ESG surveys—many don’t grasp basic sustainability concepts.”
— Jonathan Avery, Head of Technology and Data, Real Assets, LGIM

Low participation rates make it challenging to identify tenant needs or to implement green initiatives on industrial sites. These anecdotes underscore that without tenant buy-in, CapEx investments may fail to achieve their projected ROI and environmental impact.

Driving tenant participation

Asset managers are employing new approaches to engage tenants in sustainability and efficiency programs. One strategy discussed is establishing interactive tenant engagement platforms – essentially portals or apps where tenants can see their energy usage data, receive tips, and provide feedback. By making data visible and relevant to tenants, landlords encourage more conscientious behavior. For instance, a tenant portal might show how last month’s energy consumption compares to an efficiency benchmark, motivating tenants to adjust their usage. Roundtable participants also mentioned using real-time energy dashboards in lobbies or shared spaces as a form of gentle competition or awareness-raising among tenants.

In student accommodation, one participant shared that the electrification of assets required the implementation of smart building solutions that give ultimate control back to the landlord to set base usage points, with the result that OpEx is now reducing.

“It's a challenge with different types of tenants - and the ways to engage need to reflect their priorities and starting points in order to make a difference.”
— Christina Rhenburg, ESG Director, Delancey

Education and communication

A key opportunity identified is educating tenants about sustainability. Some tenants may be unaware of how their actions impact energy use or may not understand the technology installed. Asset managers are beginning to provide resources like building user guides for new systems, workshops, or even on-site sustainability training. One participant shared that their firm now offers an onboarding session for tenants after major upgrades, teaching facility managers and staff how to operate systems optimally. This not only helps realize the efficiency gains but also signals to tenants that the landlord values their partnership. Additionally, companies are piloting “energy-as-a-service” models, where tenants pay a fixed rate for energy services and the provider (or landlord) takes on managing and optimizing the actual energy systems.

Tenant engagement transforms CapEx investments from isolated technical projects into shared sustainability successes. The challenges - from apathy to lack of understanding - are real, but the roundtable stories demonstrate that with the right mix of communication, incentives, and collaboration, tenants can become champions of efficiency. Engaged tenants not only help ensure that energy and sustainability projects deliver expected returns, but they also tend to reward landlords with higher satisfaction, longer leases, and positive word-of-mouth, creating a virtuous cycle of value.

“It’s all about building that deep relationship with occupiers – that connection is key to long-term success.”
— Jonathan Avery, Head of Technology and Data, Real Assets, LGIM

Regulatory landscape

“Our investor clients don’t really care about EPC ratings; they care more about the actual emissions and the transparency around them.”
— Christina Rhenburg, ESG Director, Delancey

The evolving regulatory landscape around sustainability and energy efficiency is a powerful force shaping CapEx planning. Across jurisdictions, new laws and standards (such as carbon reduction targets and building performance mandates) are raising the bar for real estate portfolios. The roundtable made it clear that asset managers must navigate these regulations proactively, as they have direct implications for both operational compliance and asset value. Investors are already demanding decarbonization now even if the payoff or requirement is years out, while “the ROI horizon stretches beyond typical hold periods” - (Christina Rhenburg). This mismatch between regulatory timelines and investment horizons is prompting new thinking in CapEx planning.

Strategic opportunities for CapEx, beyond compliance

The discussion emphasized leveraging regulations as a catalyst for positive change. Forward-looking asset managers are trying to turn this challenge into an opportunity. If a building must be upgraded, they ask how those upgrades can also enhance tenant satisfaction or operational efficiency. For example, meeting an energy mandate by installing a new cooling system might also be used as an occasion to improve indoor air quality or tenant comfort, thereby boosting the building’s appeal.

As noted in the roundtable, the focus is on how regulations can drive long-term asset performance and tenant satisfaction, not just on ticking boxes. Some participants shared that they communicate their compliance initiatives to tenants and investors as part of a broader ESG value proposition, demonstrating that the portfolio is not only following rules but actively contributing to sustainability goals. Others noted that the changes in regulations are only going to last as long as they still make financial sense and are supported or enforced by regulation, and the clash of priorities may not be able to continue.

“It’s sustainable but expensive, irresponsible, but cheap – that clash of approaches is fascinating.” 
— Gregory Flash, Managing Director, DTZ Investors REIM

Data quality

“We have IoT data from 50 buildings, but correlating energy use with lease terms or tenant industries is manual.”
— Adam Penney, CFO at Revantage Real Estate.

High-quality data is the bedrock of smart CapEx planning, yet achieving reliable, actionable data remains a major hurdle in the real estate industry. Participants stressed that without trustworthy data on building performance, tenant behaviour, and financial metrics, making the right CapEx decisions becomes a game of guesswork. The roundtable shed light on the challenges of data gathering and offered insights into how asset managers can bolster data-driven decision-making.

Data reliability and integrity

Another issue discussed is data accuracy. Some participants noted that even basic metrics like energy consumption or occupancy rates can be unreliable if they rely on tenant self-reporting or outdated measurement systems. The group agreed that a “garbage in, garbage out” problem plagues CapEx modelling – if the input data is flawed, the resulting investment decisions may miss the mark.

Christina from Delancey described how their internal asset triage system ranks properties by metrics like emissions intensity and tenant demand, but she cautioned that it “requires constant updating” as expectations from tenants are always evolving. This speaks to the difficulty of keeping data current in a fast-changing environment.

“To have data that can help you look ahead and be able to protect the value in this building if I want to sell in 10 years’ time is where we want to go.”
— Adam Penney, CFO at Revantage Real Estate

From data to decisions

Better data quality translates to better decisions – whether it’s accurately forecasting the energy savings of a retrofit or identifying which building in a portfolio should get CapEx first because it’s underperforming on key metrics. The roundtable discussed success stories where strong data practices led to confident decision-making. One firm’s data integration allowed them to quickly simulate various scenarios (e.g., “What if energy prices double? Which projects still have a good ROI?”) and prioritize investments accordingly. Others mentioned using data to communicate with stakeholders – for example, justifying a big capital project to investors by showing detailed emissions data and improvement projections.

“We’ve got four different metering companies and can still have patchy data – you really have to layer everything to build a credible CapEx plan.”
— Jonathan Avery, Head of Technology and Data, Real Assets, LGIM

While data quality remains a challenge, it’s also a solvable one with the right mix of tools and focus. Asset managers are now keenly aware that improving data collection, integration, and analysis is an investment in its own right – one that underpins all other CapEx decisions.

Financial metrics

“I recently had a conversation with a client on why the payback period on its own isn’t a good measure; it simply doesn’t capture the broader operational benefits.”
— Anca Stefanescu, VP Europe, �㽶��ý

When assessing CapEx investments, the roundtable participants agreed on the need to expand the financial metrics used in decision-making. Traditionally, many real estate projects have been judged by the payback period – how many years until an energy upgrade pays for itself through savings – or by simple yield calculations. However, these metrics fail to capture the full value and risk of an investment. The discussion highlighted how asset managers are broadening their evaluation toolkit to ensure CapEx decisions make long-term financial sense. Several alternative metrics and approaches were discussed:

Internal Rate of Return (IRR) and Net Present Value (NPV): These metrics provide a fuller picture of a project’s financial impact over its life.

• Yield and Vacancy Impact: Improvements that boost rental income or reduce vacancy can be just as important as direct energy savings.
• Operational Savings: Reduced maintenance and lower energy costs contribute to a project’s overall value.
• Risk-Adjusted Metrics: Another sophisticated approach mentioned was adjusting returns for risk which involves scenario planning.

Long-term and holistic view

The overarching message was a shift to a long-term, holistic financial view. One attendee summarized that they now present CapEx proposals to their board not just with a payback figure, but with a full business case: including IRR, NPV, impact on asset value (appraisal uplifts), tenant retention projections, and contribution to ESG targets (which, while non-financial, are tied to investor expectations and thus indirectly financial). By doing so, they ensure that decisions aren’t made in a vacuum of short-term thinking.

This holistic evaluation is crucial especially for sustainability-related investments, where the return may come in forms like compliance (avoidance of penalties), reputation (attracting ESG-conscious investors or tenants), and future-proofing, which traditional financial metrics might miss.

Opportunities and innovation

“Interestingly enough, we’re starting to see CapEx committees forming, where sustainability, finance, operations, and maintenance all sit at the same table.”
— Anca Stefanescu, VP Europe, �㽶��ý

Despite the challenges, the roundtable was optimistic about emerging opportunities and innovative approaches in CapEx planning. These innovations promise not only to improve financial outcomes but also to drive significant environmental benefits. Asset managers shared several forward-looking trends that are reshaping how they plan and execute capital projects.

Advanced analytics and predictive maintenance

The use of data analytics and Internet of Things (IoT) technology is revolutionizing CapEx allocation. By equipping buildings with sensors and monitoring systems, asset managers can gather detailed performance data (energy use, equipment health, occupancy patterns) and apply predictive algorithms. One participant noted their IoT analytics identified millions in wasted HVAC energy, prompting targeted upgrades. Moreover, predictive maintenance models can forecast when critical equipment (boilers, chillers, etc.) is likely to fail or lose efficiency well in advance. This allows owners to schedule CapEx for replacements or overhauls at optimal times, avoiding costly emergency repairs and downtime. Embracing these technologies means CapEx budgets are spent more efficiently – on the right fixes at the right time – and buildings run more smoothly. Over time, as AI and analytics improve, we can expect even more granular optimization of capital spending, essentially a data-driven CapEx roadmap that maximizes ROI and sustainability impact.

Tenant-landlord collaboration models

As discussed earlier, a shift toward partnership with tenants opens up new models for funding and implementing improvements. Co-investment arrangements is one innovative approach that was highlighted. Another is offering energy-as-a-service or performance contracts, where a landlord or third-party firm installs improvements (like efficient lighting or solar panels) at little or no upfront cost to the tenant, and the tenant pays back via a share of the savings or a fixed fee. Additionally, some landlords are experimenting with green lease certifications or awards, which recognize tenants who meet certain sustainability criteria, creating a positive reinforcement loop. The opportunity here is to transform the traditionally fraught landlord-tenant dynamic into a collaborative one, unlocking projects that might not happen otherwise.

“WeWork forced the landlord not to be complacent which has opened up the dialogue between real-estate and occupiers. This has changed the lease lengths in the UK to closer match Europe which has shifted traditional investment strategies. You can’t just rely on 10 year leases anymore, and need to be engaging in a way landlords typically haven’t been used to - it’s no longer just a landlord and legal representative.”
— Niki Dembitz, Portfolio Manager, PIMCO

Circular economy and sustainable design

An exciting area of innovation is incorporating circular economy principles into CapEx projects. Instead of the conventional approach (build → use → dispose → rebuild), asset managers are looking at ways to reuse and recycle materials during renovations and tenant fit-outs.

Jonathan Avery from Legal & General described a “FlowChain” platform enabling tenants to trade or hand over used office materials (like furniture, fixtures) for reuse, rather than throwing them away. They also implemented modular designs – such as demountable interior walls – which mean when one tenant leaves, the space can be reconfigured easily for the next without a full demolition and rebuild.

Jonathan Avery noted, “Tenants expect flexibility—our modular designs reduce future CapEx by extending asset lifespans.” By investing a bit more upfront in modular, reusable components, they significantly cut down on waste and cost for each tenant turnover (one case cited a 40% reduction in refurbishment costs due to reusing partition walls). Some firms now mandate a percentage of reused materials in projects – Delancey requires 30% of tenant improvement materials come from prior projects, creating a “closed-loop system that slashes embodied carbon.” This innovation not only reduces environmental impact, but also lowers material costs over time.

“We’ve been trying to look at our assets as buildings as material banks – not just as structures, but as resources for future projects.”
— Christina Rhenburg, ESG Director, Delancey

Strategic supply chain management

Another opportunity lies in thinking ahead and at scale. Instead of a building-by-building approach, large asset managers are leveraging their portfolio size to achieve economies of scale in CapEx. For instance, anticipating the surge in demand for renewable energy systems, some have bulk-ordered solar panels or heat pumps and pre-booked installation slots for the coming years. By doing so, they lock in prices and ensure availability, essentially securing CapEx “ingredients” in advance. This not only mitigates the risk of price inflation or shortages but can also standardize quality. Additionally, bulk purchasing can sometimes attract better financing deals or supplier partnerships, further stretching the CapEx budget. The innovation here is treating CapEx deployment as a portfolio-wide strategy rather than a series of ad hoc projects, borrowing techniques from supply chain management to improve outcomes.

“Within 12 to 24 months, we’ll see different names emerging – firms that truly understand how to blend private equity with real estate.”
— Valentina Shegoyan - Founding Partner, OPREIM

By harnessing technology, fostering new partnerships, and embracing sustainability, asset managers can achieve superior financial returns and make substantial progress on environmental goals. The clear takeaway is that those who innovate in CapEx today will reap benefits in both competitive advantage and future readiness.

Repositioning assets

“There is still a big chunk of the market, maybe 20%, that regardless of what you do - will not attract tenants.”
— Valentina Shegoyan - Founding Partner, OPREIM

Repositioning assets was widely discussed and is another innovative approach to CapEx planning. Several participants outlined ways that older offices have been turned into mixed-use spaces or incubation hubs, attracting and encouraging different types of tenants to engage with them, and ultimately building new opportunities for the future.

“It took us a lot of energy to explain that there was no point in doing most of this CapEx because we could renew all the rules and it would not increase rent by one cent.”
— Gregory Flash, Managing Director, DTZ Investors REIM

The “flight to quality” has made the office market highly competitive, with the lower end of the market unable to compete with the upgrades required and the huge CapEx implications of making a building more sustainable and attractive. A part of any strategy is knowing when to exit and having the right data to support the decision not to further invest is as important as everything else.

“Offices are the most human and emotive sector out there, whereas retail and sheds serve an operational need. Great offices need more than energy efficiency to appeal and inspire; they need to arouse the human spirit. We don’t have metrics for the human touch, but buildings which can capture this will outperform the wider market.”
— Hugh White, Head of National Investment, BNP Paribas Real Estate

Conclusion & key recommendations

Today’s CapEx strategy must be holistic, integrating regulatory compliance, smart leasing, tenant engagement, robust data management, and innovative financial analysis. Asset managers who weave these elements together will meet today’s challenges and position their portfolios for long-term success.

Strategic Recommendations for Asset Managers:

1. Integrate Lease and CapEx Strategies
2. Invest in Data Infrastructure
3. Tailor Strategies by Asset Class
4. Enhance Tenant Engagement
5. Adopt Comprehensive Financial Metrics

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