Improving EPC ratings in commercial property

The UK Government’s net-zero 2050 goal has significantly motivated EPC ratings to be raised throughout commercial property holdings. EPC ratings have evolved from a straightforward compliance tick-box to a strategic focus as regulatory investigation gets more severe. For asset managers, property developers, and real estate executives, improving EPC ratings is now key to protecting capital value, securing green finance, attracting quality tenants, and future-proofing investments. Proactive development is not just smart but absolutely necessary in the context of commercial properties.

Commercial property EPC regulations

The UK Government’s Net Zero Strategy sets a clear goal: by 2030, all commercial rental properties must meet an EPC B rating. This represents a substantial tightening of current standards, moving beyond the existing EPC E minimum enforced under MEES regulations. As of April 2023 however, properties with an EPC rating below E cannot be let out unless an exemption is registered. The trajectory is clear: minimum energy standards are becoming progressively more demanding.

According to the Department for Levelling Up Housing and Communities, around 85% of commercial buildings currently fall short of the EPC B standard. As a result, a sizable section of the market is at risk from regulations. According to the UK government, their number of non-domestic buildings account for over 12% of UK emissions, making them a prime but urgent  target for decarbonisation initiatives.

To ensure the long-term sustainability of their properties, landlords must be aware of the latest tightening standards and understand the current commercial EPC rules.

The financial impact of poor EPC ratings

The risks associated with substandard EPC performance are multifaceted. Firstly, there is the threat of stranded assets, properties that cannot be rented, sold or mortgaged without costly retrofits. As the regulatory thresholds tighten, assets with a low EPC rating for commercial property will become progressively less attractive to investors and tenants.

Further, poor EPC ratings impact asset valuation and rental yields. Properties with low ratings are increasingly subject to ‘brown discounts’ on price, reflecting the future capital required for remediation. Conversely, properties meeting or exceeding EPC B standards often command a “green premium” in both sale price and rental value.

Difficulty in securing green financing compounds the challenge. Many lenders now incorporate sustainability criteria into underwriting policies. Without a solid EPC rating, property owners may find borrowing more expensive or even inaccessible, especially as ESG standards tighten across the financial sector.

How commercial property owners can future-proof assets

The future landscape for EPC commercial property ratings is clear-cut: B or better will be the expectation by 2030, with a push towards A thereafter. Landlords who simply aim for a B may find themselves needing to upgrade again within a decade to keep pace with regulatory and market expectations.

Investing towards an EPC A rating now offers resilience against future tightening of commercial property EPC requirements. Sustainable, energy-efficient renovations not only address today’s standards but provide a buffer against stricter compliance thresholds.

Future-proofed buildings are also increasingly demanded by tenants. Younger generations, particularly Millennial and Gen Z employees, expect ESG-compliant workplaces that align with their values. Buildings that cannot demonstrate sustainability credentials risk becoming obsolete in an increasingly competitive talent market.

Associated costs to assessing ROI

Addressing the commercial EPC cost for upgrading properties can initially seem daunting. However, the investment often yields significant returns.

• Transitioning to “green premium” properties can command 6–10% higher rental yields, while sustainable renovations typically offer payback periods ranging from 3 to 7 years depending on the measures implemented.

• Operational cost savings further encourage the investment case. Energy-efficient HVAC systems, modern LED lighting, and building envelope upgrades can lower utility bills significantly. Smart building management systems also enable ongoing performance optimisation, reducing waste and cost over time.

• While reducing running costs, premium utilities also enhance occupant comfort, a key factor in attracting and retaining tenants.

Case Study: FOUNDRY Wandsworth

FOUNDRY partnered with Interaction to deliver a bold, community-led coworking space in Wandsworth’s New Acres development. Designed to meet BREEAM Excellent standards and achieve an EPC A rating, the space includes FSC-certified timber, VOC-free materials, and natural ventilation strategies. With over 240 workstations, collaborative areas, a large breakout and events space, and a roof terrace, the project achieved strong tenant uptake and began generating returns from day one, opening four days ahead of schedule. The result is a commercially successful, energy-efficient workspace that aligns with ESG goals and appeals to modern occupiers.

Strategies to boost energy performance and tenant appeal

To remain competitive in an evolving regulatory landscape, commercial property owners must focus on measures that enhance both energy performance and tenant satisfaction. Beyond retrofitting, this means adopting a holistic approach that encompasses technology, collaboration, maintenance and design. When implemented strategically, these enhancements can increase rental yields, reduce operational costs, and extend the lifecycle of the property. Below are several approaches that support these goals while contributing to improved EPC ratings.

Sustainable energy technologies

One of the most effective paths to energy improvement lies in technology. Upgrading to LED lighting can cut lighting energy use by up to 80%. Modern HVAC systems that incorporate heat recovery and variable refrigerant flow technology offer significantly higher efficiency.

Solar panels, battery storage systems, and power purchase agreements for green electricity all support progress towards EPC targets. These sustainable office solutions not only reduce emissions but also lower long-term operational costs.

Routine maintenance and assessments

Proactive maintenance plays a crucial role in maintaining and improving EPC ratings. Regularly assessing a building’s fabric, plant performance, and controls can reveal opportunities for low-cost improvements. For instance, recommissioning an outdated HVAC system often restores performance levels without significant capital expenditure.

Routine energy audits and building performance evaluations ensure that minor inefficiencies do not snowball into costly failures. Building owners should also keep EPC certificates up to date to reflect any upgrades that may have improved performance.

Another consideration is that of AI-powered building management systems, which are being used to continuously monitor, learn from, and optimise energy consumption. These systems dynamically adjust building controls in real time, reducing waste, enhancing occupant comfort, and supporting stronger EPC outcomes.

Collaborating with tenants and investors

Engagement with tenants and investors is increasingly vital. Tenants can support operational improvements by adopting sustainable fit-outs, using energy-efficient equipment, and participating in green lease initiatives.

Green leases, which embed sustainability commitments into tenant agreements, create shared accountability for energy performance. Collaborating with investors to align on net-zero targets also unlocks access to green capital and enhances reputational value.

Explore why green design is redefining commercial real estate.

Office design for energy efficiency

Smart office design strategies can significantly enhance a building’s energy performance.

Layouts that maximise daylight penetration reduce reliance on artificial lighting. Natural ventilation strategies, where feasible, cut the need for mechanical cooling. Materials with high thermal mass help moderate internal temperatures naturally.

Selecting sustainably sourced and low-embodied-carbon materials for office fit-outs can further contribute to improved EPC outcomes.

Case Study: Osborne Clarke, Bristol

Our Osborne Clarke project in Bristol has achieved several notable sustainability certifications. Occupying five floors of the Halo Building, one of the UK’s most sustainable office buildings, Osborne Clarke’s offices has been rated EPC A, BREEAM Outstanding, and SKA Gold. These certifications were achieved through a holistic design approach that considered the sustainability, of every single feature, finish and piece of furniture. Suppliers were judged on a sustainability matrix, and materials were chosen for their sustainability credentials and durability. You can read more about our approach to sustainability for this ground-breaking project here.

Preparing for future net-zero requirements

The push towards EPC B by 2030 is a significant milestone, but it is not the end goal. To truly align with net-zero carbon ambitions for 2050, commercial property owners must look beyond minimum standards and embrace proactive, future-focused upgrades today.

Securing high EPC ratings is not simply a regulatory necessity, it is a strategic investment into asset value, tenant attraction, operational efficiency, and access to capital.

At Interaction, we specialise in designing energy-efficient, sustainable office spaces that deliver long-term value. Get in touch with us here to discuss how we can help future-proof your property portfolio.