The critical role of circular business models in real estate decarbonisation: portfolio-level evidence from Europe

Purpose This study examines how the intensity of circular economy business models in European listed real estate companies relates to portfolio-level net-zero performance, and how net-zero portfolio strategies and green leases shape this relationship. Design/methodology/approach A multi-year unbalanced panel dataset is constructed for 108 EU-27 and UK listed property companies (827 firm-year observations, 2011–2021) by combining GRESB Real Estate Assessment benchmarks and audited financial reports. Fixed-effects panel models are estimated, along with mediation and moderation analyses and extensive robustness checks across alternative net-zero and carbon-intensity indicators. Because GRESB participation is voluntary, the estimation sample is limited to firms that elect to report, and the reported associations describe patterns within GRESB-reporting portfolios rather than the broader population of unlisted or non-reporting property companies. Findings The results indicate that circularity is systematically associated with lower operational energy and carbon intensity. Specifically, a one-unit increase in the CBM Intensity Index (range: 10–35%) is associated with a 2.5% reduction in energy intensity. Net-zero portfolio strategy partially mediates this relationship (45.8% of the total effect), and green lease adoption amplifies it. The CBM–net-zero association is significantly stronger in office-dominated portfolios. Research limitations/implications This study's reliance on panel data from large, listed European real estate firms limits the generalisability of its findings and precludes strong causal claims. The data, derived from secondary sources, may also contain reporting biases. Future research should employ more granular, project-level data and longitudinal designs to validate these findings. Investigating a broader range of variables, including financing structures and governance quality, across different asset types and geographic markets would provide a more comprehensive understanding of the interplay between circular business models and decarbonisation in the real estate sector. Practical implications For property managers and investors, this research underscores the practical benefits of integrating circular business models into portfolio strategy. Adopting practices such as adaptive reuse, flexible space design, and service-based leases is not merely a sustainability initiative but a key driver of financial and environmental performance. These strategies directly contribute to reducing operational energy and carbon intensity, thereby future-proofing assets against climate-related risks and enhancing their long-term value. Implementing green lease agreements can further align tenant and owner interests, accelerating the transition to a net-zero, circular real estate portfolio. Social implications The transition towards circular business models in real estate carries significant social implications. It fosters a shift in the labour market, creating demand for skilled professionals in retrofitting, sustainable design, and material lifecycle management. By prioritising the adaptive reuse of existing buildings over new construction, this approach can contribute to urban regeneration and the preservation of cultural heritage. Furthermore, the development of more energy-efficient, flexible, and healthier buildings enhances the well-being of occupants and can lead to more resilient and equitable communities and sustainable communities. Originality/value This research provides rare multi-country portfolio-level evidence that directly links circular business model intensity to decarbonisation performance, offering strategic and policy guidance for asset managers and institutional real estate investors operating under CSRD and EU Taxonomy obligations. Findings are interpreted as conditional associations within the GRESB-reporting segment of the European listed property sector, not as causal or population-wide effects.