Glossary

Stranded Asset

A property whose market value or income-producing capacity is materially impaired — potentially to the point of being unfinanceable or unsellable at prior assumptions — because it fails to meet evolving energy performance, climate risk, or regulatory standards.

An asset becomes 'stranded' when the cost to bring it into compliance with building performance standards, insurance requirements, or tenant ESG expectations exceeds what the market is willing to underwrite, effectively trapping capital in a property that cannot be refinanced, sold, or leased at assumed values without substantial reinvestment. This is the sharpest expression of transition risk in real estate: an older, energy-inefficient building in a jurisdiction with an aggressive Building Performance Standard, facing large annual penalties and a shrinking pool of tenants and buyers willing to underwrite the retrofit cost, can see its effective value fall well below what a traditional income approach would suggest. Stranded asset risk is a growing focus of institutional portfolio strategy, prompting some owners to proactively dispose of or retrofit older, non-compliant assets ahead of regulatory deadlines rather than absorb the risk of holding through a compliance cliff.