New research from the British Property Federation paints a stark picture for the UK’s commercial real estate sector. According to their analysis, over 80 percent of commercial buildings across England could be deemed unlettable by 2030 if they fail to meet new energy efficiency standards.
The government has proposed that all commercial properties must reach a minimum Energy Performance Certificate (EPC) rating of B within the next five years. But progress has been slow. In major cities like London, Birmingham, Manchester, Leeds and Bristol, a staggering 83 percent of buildings are still rated EPC C or lower. The interim 2027 target of achieving at least a C rating also appears out of reach, with more than half of all buildings still sitting at D or below.
Property owners and investors say they’re stuck in a holding pattern. The original proposals were outlined in a 2021 government consultation, but no official response has followed. That lack of clarity has only made a tough situation harder, especially in today’s challenging financing environment.
Although effective once done, retrofitting older stock comes with steep costs. Inflation has driven up prices for materials and labour, and many landlords report that banks are hesitant to finance upgrades without a more predictable regulatory roadmap and understanding of the risks involved. In cities like Bristol and Birmingham, only 15 percent of buildings currently meet the EPC C level. London fares slightly better at the top end, but still, only 19 percent of its buildings meet the EPC B standard.
While the Department for Energy Security and Net Zero has said that exemptions will remain in place where upgrades aren’t cost-effective, property leaders are pushing for more than just reassurance. They increasingly want clear thresholds, firm timeframes and practical financial support if the market is going to avoid a wave of stranded assets.
But it’s not just building owners facing risk. Banks will be on the hook too. As regulations tighten, lenders with exposure to low-rated properties will see asset values fall and subsequently their portfolios weaken. Without action, the financial risk spreads well beyond the buildings themselves.
Netto is working with UK banks to help them identify, assess and finance energy upgrades across commercial property portfolios. We give lenders the clarity they need so they can help property owners unlock the funding they need to move forward.
