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Despite the introduction of Minimum Energy Efficiency Standards (MEES) in April 2023, more than 13,000 commercial properties in England and Wales still have an Energy Performance Certificate (EPC) rating of F or G.
These properties are prohibited from being leased under the new rules, which aim to improve energy efficiency in the sector, according to Edie.
In 2021, the U.K. Government set out a plan to raise the minimum EPC rating to B for privately rented non-domestic buildings by 2030. However, no formal updates have been provided by the Conservative government. The Labour-led government has pledged to provide an update later this year as part of its Warm Homes Plan.
Research from property data firm Search Acumen indicates that the pace of energy efficiency improvements has slowed, with the gap between the 2030 target and progress widening from eight years to ten. In 2024, improvements to A*-B rated properties dropped by 20% compared to the previous year.
The office sector has been the worst performer, with 5,761 office buildings still rated F or G. Only 15% of office properties meet the target EPC bands, while the hospitality sector leads with 31% of properties rated A, A*, or B. Retail and education have also made progress, with retail properties now having just 0.54% non-compliant buildings and education cutting F and G ratings to 1.8%.
The challenge of decarbonizing British real estate is vast, with around 70% of U.K. commercial floor space rated EPC C or below, according to research from Knight Frank. If MEES for commercial properties are raised as proposed, a large portion of these buildings could become unlettable.
To stay on track for the 2030 target, the rate of properties improving to a B rating would need to double, from 8% per year to 18%. In London, nearly half of office space still needs upgrades, and similar patterns are seen in other major U.K. cities, where up to 65% of office space is below the expected standard.
Investor attitudes are slowly changing. A survey by Knight Frank found that over 75% of European investors are prioritizing upgrades to their portfolios, with 58% actively acquiring low-performing assets with the intention of improving them.
However, there is still a disconnect between environmental risks and property valuations, as the financial impact of poor energy ratings has not yet been fully considered in investment decisions.
