Commercial landlords plan to spend £500k to meet EPC standards

More than half of commercial landlords (55%) plan to invest £100,000 or more in improving the energy efficiency of their properties over the next 12 months. 

Research by Handelsbanken Professional Landlords Survey also reveals one in five professional landlords (19%) plan to spend £500,000 or more to meet EPC standards.

The survey is based on nationwide research among professional investors with an average of 29 properties worth £14 million.

All commercial properties in England and Wales must have an EPC rating of at least E

The research found all property business owners surveyed plan to invest at least £1,000.

The survey found the vast majority (92%) of professional landlords expect the value of their portfolios to increase by at least 5% over the next 12 months.

Since the beginning of April this year, Minimum Energy Efficiency Standards (MEES) for all commercial properties in England and Wales must have an EPC rating of at least E or higher.

More than half (57%) of landlords were optimistic regarding their commercial properties meeting these new standards by the deadline.

However, two-fifths (44%) of landlords admitted they were only moderately familiar with the government’s proposals to increase minimum EPC standards to B by 2030.

In 2021, the government white’s paper proposed, increasing MEES for commercial lettings to EPC C by 2027 and EPC B by 2030, while also tightening the system around exemptions.

Staying in line with EPC regulations and upgrading energy efficiency have become a priority for many landlords

Richard Winder, head of sustainability at Handelsbanken, said: “Beyond these MEES requirements, there are growing expectations on both landlords and tenants to take action on climate change and nature, and these are beginning to affect the economics of the rental market.

“Staying in line with EPC regulations and upgrading energy efficiency have become a priority for many landlords, who are very aware of the associated challenges.

He added: “We would encourage investors to look beyond the next compliance hurdle towards the broader sustainability transition underway, and to consider the efficiencies and opportunities that might be created by taking a long-term, strategic approach.”

Though the plans have not been made into law, ministers have previously proposed that by April 2025, newly rented properties in England and Wales will need to meet a minimum EPC standard of C – tougher than the current E standard. The regulation is also slated to apply to existing tenancies from 2028.

The government has also suggested lifting the cap on landlords’ maximum spend from £3,500 to £10,000, based on the assumption that landlords will spend £4,700 per property to reach a C rating.

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