New research from Knight Frank highlights that installing LED lighting with smart controls is a critical step for improving the Energy Performance Certificate (EPC) ratings of office buildings. 

The report, Meeting the Commercial Property Retrofit Challenge, explores how the built environment is adapting to the challenges of retrofitting commercial properties.  

According to Knight Frank, approximately 70% of UK commercial floor space is currently rated EPC C or below. This puts it at risk of becoming unlettable if proposals go ahead to raise the minimum energy efficiency standard (MEES) for commercial property to an EPC B in 2030. 

Key insights from the report include: 

  • Cost-effective solutions: Not all energy efficiency improvements are capital-intensive or require vacant buildings. On average, four interventions are needed to raise an office’s EPC rating. 
  • Impact of LED lighting: Among properties that upgraded from EPC E to EPC B, 65% included LED lighting with smart controls, while only 36% replaced gas-fired boilers with air-source heat pumps. 
  • Accelerating obsolescence: The report emphasizes that regulatory, physical, financial, and functional sustainability risks are accelerating property obsolescence, impacting valuations and market movement. 

Additional findings illustrate the scale of the challenge: 

  • EPC improvements: Since 2019, commercial floor space rated EPC B or above has grown by an average of 8% annually, reaching 2 billion sq. ft by the end of 2023. However, this growth rate needs to more than double to meet the 2030 deadline. 
  • Market mismatch: Almost half of office transactions across eight major UK cities in 2023 were for EPC A or B-rated properties, up from 40% in 2019, despite the shortage of these. Leeds proved to be the most mismatched market, with 65% of leased office space having an EPC rating of A or B, yet only a third of the total office stock meets this level. 
  • Future outlook: In London, as of July 2024, 47% of available office space meets the EPC B minimum, meaning nearly 13 million sq. ft may require upgrades within the next six years. 

This report is the first of a three-part series by Knight Frank, detailing the decarbonisation efforts required to align real estate assets with emerging sustainability standards. 

  

Click here to download the report.