Maximising Property Value: Why a Better Commercial EPC is Your Best Investment
Did you know……..improving a building’s EPC rating can lead to 4.2% higher rents per EPC band improvement and a 3.7% increase in capital value. That means better total returns, reduced risk, and enhanced asset liquidity.
In the current UK real estate market, a Commercial Energy Performance Certificate (EPC) has transformed from a simple compliance document into a powerful driver of financial performance.
With the tightening of Minimum Energy Efficiency Standards (MEES) and a global shift toward ESG (Environmental, Social, and Governance) goals, the "green premium" is no longer a theory, it is a measurable reality.
If you are a commercial landlord or property investor, improving your EPC rating isn’t just about avoiding fines; it’s about significantly improving your rents, capital values and total returns.
Measuring the Financial Benefit: JLL Research
The largest study to date provides compelling evidence as to the financial benefits of improving the EPC rating for your properties. According to a landmark 2023 research report by JLL on the London office market, there is a direct correlation between higher EPC’s achieving better financial returns.
The study assessed over 600 transactions, and found that for every single step-up in an EPC band (for example, moving from a D to a C), properties saw:
A 4.2% increase in rental income.
A 3.7% increase in capital value.
This data proves that tenants and investors are willing to pay a premium for spaces with a higher EPC rating.
Rental Value Improvement (%)
| From \ To | G | F | E | D | C | B | A |
|---|---|---|---|---|---|---|---|
| G | — | 4.2% | 8.6% | 13.1% | 17.9% | 22.8% | 28.0% |
| F | — | — | 4.2% | 8.6% | 13.1% | 17.9% | 22.8% |
| E | — | — | — | 4.2% | 8.6% | 13.1% | 17.9% |
| D | — | — | — | — | 4.2% | 8.6% | 13.1% |
| C | — | — | — | — | — | 4.2% | 8.6% |
| B | — | — | — | — | — | — | 4.2% |
Capital Value Improvement (%)
| From \ To | G | F | E | D | C | B | A |
|---|---|---|---|---|---|---|---|
| G | — | 3.7% | 7.5% | 11.5% | 15.6% | 19.9% | 24.4% |
| F | — | — | 3.7% | 7.5% | 11.5% | 15.6% | 19.9% |
| E | — | — | — | 3.7% | 7.5% | 11.5% | 15.6% |
| D | — | — | — | — | 3.7% | 7.5% | 11.5% |
| C | — | — | — | — | — | 3.7% | 7.5% |
| B | — | — | — | — | — | — | 3.7% |
Why Properties with Top EPC Ratings Command Top Prices
1. Attracting Premium Tenants
Top-tier corporate tenants are increasingly shunning energy-inefficient 'brown' buildings in favour of spaces that align with their net-zero and ESG targets. Achieving an EPC A or B rating positions your asset to attract these premium occupiers, who see a sustainable workspace as a reflection of their own brand values.
By future-proofing your building, you create a more liquid asset that is easier to let, appeals to a wider range of high-quality tenants, and consistently achieves superior rental yields over low-rated properties.
2. Reducing Operational Costs
In an economy where tenants are being squeezed by inflation and ever increasing costs, an energy-efficient building is a more attractive, sustainable proposition. The cost-of-energy crisis has made energy efficiency a top priority for occupants.
A building that has achieved an EPC B, A or A+ will usually provide lower energy costs than an equivalent building with a poorer EPC rating.
3. Future-Proofing Against MEES Regulations
The UK government has set ambitious targets, aiming for a minimum EPC Rating of B by 2030.
Properties that languish at a D or E rating risk becoming "stranded assets", properties that cannot be legally let or sold without significant, rushed capital expenditure. By upgrading now, you avoid the "compliance bottleneck" and ensure your asset remains liquid.
There are currently 1,600,000 commercial assets in the UK that fall below an EPC B and may require some form of physical upgrade prior to the April 2030 deadline. Because of this, we are forecasting significant cost inflation as demand outstrips supply capacity to deliver these works required.
Beyond the Numbers: Additional Benefits of a Better EPC Rating
While the 4.2% rental value improvement and 3.7% capital value improvement per EPC band identified by JLL are the headline figures, the benefits of a better EPC extend into other areas of asset management:
Reduced Void Periods: Energy-efficient buildings tend to let faster than their less-efficient counterparts, reducing the time your property sits empty.
Access to Green Finance: Many lenders now offer "Green Loans" with preferential interest rates for properties that meet high energy-efficiency benchmarks.
Enhanced Tenant Retention: Comfortable, well-ventilated, and well-lit spaces improve employee wellbeing, leading to longer leases and fewer tenant turnovers.
How to Unlock This Value
Improving your rating doesn’t always require physical upgrade works, which can be expensive and disruptive. Strategic investments often include:
EPC Renewal: Start by re-assessing the existing building to establish the current baseline position using today’s carbon factors and methodology. In many cases, a simple EPC renewal using our best-in-class approach is enough to secure MEES compliance beyond 2030.
Upgrade Pathway: For those buildings that do require improvements to achieve MEES compliance, we provide precise, tailored advice on the options available, the costs involved, and the impact on the EPC.
Level 5 EPC: A level 5 EPC uses more sophisticated inputs and software to undertake the energy calculations required for the EPC. Typically, a level 5 EPC will produce a 5 - 10% better result than a standard level 3 or 4 EPC. It is therefore worth considering undertaking this analysis before planning or undertaking any physical works.
Conclusion
The 2023 JLL report sends a clear message to the UK commercial sector:
Better EPC Ratings Improve Returns.
Investing in your Commercial EPC rating is a proven way to increase your property's capital value by 3.7% per band and secure a 4.2% rental premium. In a competitive market, an energy-efficient building isn't just a "nice to have", it is the key to maximising your Return on Investment (ROI).
At Hollen+, we specialise in cost-effective strategies to achieve MEES compliance in the most effective way possible, ensuring it meets environmental standards and drives profitability.
From decarbonisation to smart energy solutions, we have the tools to maximise your property’s potential while minimising its environmental impact.
Talk to us today about achieving MEES compliance in the most cost-effective way possible.