The Human Building and the New Productivity Metric for Real Estate

• Human in the building: Commercial real estate’s focus may need to shift from building performance to human performance.

• Mallmentum: Retail real estate is defying expectations in 2025, surging ahead of other property sectors as investor confidence returns.

• Stormy forecast: Climate-exposed real estate is facing a new reality as rising disaster costs and vanishing insurance reshape the true price of ownership.

• AI, data and energy: Webinar about how CRE asset managers are using AI and data tools to transform energy management. Sign up

• Office-to-residential conversion: Webinar on data-driven metrics and insights for profitable office-to-residential conversions. Sign up

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Perspectives

The Human Building and the New Productivity Metric for Real Estate

The commercial real estate sector has long measured success by metrics like energy use, carbon footprint, and material efficiency, but these benchmarks overlook the most valuable asset in a building—the people inside. While LEED and other certification programs have made sustainability a priority, their energy-saving features sometimes come at the expense of tenant comfort and productivity. The next evolution uses real-time data and AI to adapt to occupant needs in ways that deliver a much greater return on investment.

This next evolution of smart building, “hyper intelligent buildings,” start with a digital twin built from scans, BIM models, and sensor networks, then layer in behavioral and environmental data like air quality, noise levels, and even sentiment analysis. This allows systems to adjust dynamically—optimizing lighting for circadian rhythm, airflow for cognitive performance, or layouts for evolving team structures. Unlike static certification checklists, hyper intelligent buildings continuously learn and improve, directly tying operational decisions to human-focused KPIs such as collaboration frequency, wellness indicators, and satisfaction scores.

The concept is more than just technology—it’s an economic shift. Productivity gains from improved occupant well-being can far outweigh energy savings, and buildings offer a platform where building owners pay for measurable outcomes rather than installations. As governments push for digital twin adoption and tenants demand workplaces that enhance well-being and flexibility, the industry’s competitive edge may soon rest not on efficiency alone, but on creating environments that actively boost human performance.

Overheard

Retail Real Estate Investment Rallies, Outpacing Other Property Types

According to a new report by JLL, retail real estate investment saw an unexpected upswing in the first half of 2025, with transaction volumes climbing 23 percent year-over-year. The West led the charge, doubling its activity with a 107 percent jump, hinting that investor confidence is returning to certain corners of the market. After years of being considered the laggard of commercial real estate, retail is showing a resilience that few predicted.

The bounce isn’t coming from a flood of speculative bets but from a scarcity of quality product and a steady demand for space in centers anchored by essential services or strong experiential draws. With new construction stymied by high costs and prolonged timelines, vacancy rates remain near record lows, supporting stable rent growth. This scarcity has created an environment where well-positioned assets command competitive bidding, and capital that might have been hesitant a year ago is now moving more decisively.

Compared to other property types, retail’s story looks increasingly attractive. Office remains mired in uncertainty over long-term workplace patterns, and multifamily’s once-unassailable growth narrative has softened under the weight of higher interest rates and swelling supply in some markets. Industrial continues to perform well, but cap rate compression has left less room for upside. In that context, retail’s combination of predictable income, limited new supply, and improving fundamentals has caught the attention of investors who just a few years ago wouldn’t have given it a second look.

The Growing Risk Premium for Climate-Exposed Real Estate

The growing cost of rebuilding after natural disasters is hitting homeowners harder than ever. FEMA data shows a clear upward trend in the damage assessments for fires in the West and severe storms in the South. Over the last decade, the average property damage from wildfires in Western states rose 15 percent to $143,000 per eligible claim, while storm-related damages in the South have also ticked up, averaging $9,200 in recent years. With extreme weather events becoming more frequent and severe, recovery is increasingly expensive—and increasingly common.

Insurance is supposed to be the safety net in these situations, but that net is fraying. From 2020 to 2023, a rise in local disaster risk translated into an average $500 annual increase in insurance premiums, with projections that climate-exposed homeowners could see rates climb another $200 annually by 2053. More troubling is the fact that in some high-risk areas, insurers are pulling back entirely, leaving homeowners without coverage and, in many cases, without the ability to secure a mortgage.

This trend is more than just a homeowner headache—it’s a structural risk. Rising premiums and disappearing insurance options can depress property values, deter investment, and destabilize entire communities. For investors, lenders, and developers, it underscores the need to evaluate not just the cost of construction, but the cost and availability of insuring that asset over its lifespan. In climate-exposed regions, the true price of ownership is being rewritten by the weather just as much as the supply and demand.

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Propmodo Daily is written and edited by Franco Faraudo with contributions from readers like you and the Propmodo team.

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