Quantifying the impact of ESG drivers on Saudi commercial real estate Investment using SEM

To meet Saudi Arabia’s Vision 2030 and achieve sustainable investment, commercial real estate investors are increasingly seeking properties with ESG features. Unfortunately, identifying these properties and quantifying their impact is difficult. This study aims to develop a model to identify key ESG drivers and measure their effect on commercial real estate investment decisions. Using a correlational research design, data were collected through simple random sampling with questionnaires distributed to stakeholders. Principal component analysis (PCA) in SPSS V24 grouped ESG drivers into constructs, followed by confirmatory factor analysis and structural equation modelling in AMOS Graphics V24 to validate the model using fit indices (SRMR, CFI, NFI). The model identifies eco-friendly buildings, responsible property management, and stakeholder value creation as critical ESG drivers, with eco-friendly buildings exerting the most significant influence on commercial real estate investment decisions. The model also reveals that their decision to invest in properties embedded with ESG is dependent on ensuring high returns, resilience, and sustainable cash flow. The study contributes to research by empirically testing the relationship between sustainable urbanism and property investment decisions. The study promotes a cultural shift from a focus on environmental metrics in investment decisions toward a more holistic approach, thereby aligning commercial real estate with international best practices and Vision 2030.