The rules are changing. Fast. If you own or manage commercial property in England and Wales, the energy performance of your buildings has become a hard commercial issue. It is a liability for those who ignore it, and a competitive advantage for those who move early. Which one it becomes depends entirely on what you do next.
Here is the thing: a significant portion of commercial landlords still treat Energy Performance Certificate (EPC) compliance as a future problem. The legislation is already live, enforcement is tightening, and the upgrade deadlines ahead are ambitious. Waiting is an expensive strategy.
At Onward Holdings, we operate across industrial, commercial, and retail property in the North of England. We know this issue at ground level. This article lays out what the current EPC regulations require, where the rules are heading, and what landlords holding commercial units, industrial sheds, or retail space need to do to protect their assets.
What Is an EPC and Why Does It Matter for Commercial Property?
An Energy Performance Certificate rates a building’s energy efficiency on a scale from A (most efficient) to G (least efficient). For commercial properties, the rating is calculated using government-approved software called the Simplified Building Energy Model (SBEM). It factors in insulation, heating systems, ventilation, lighting, and increasingly, on-site renewable energy generation.
Critically, the EPC carries real legal weight. Under current legislation, a poor EPC rating can make your property legally un-lettable. That has very real consequences for rental income, asset value, and your ability to refinance.
For warehouses, industrial units, and retail premises specifically, the scale of the challenge can be significant. Large roof and wall surface areas mean substantial heat loss. Many older commercial buildings were built with energy performance as an afterthought. Retrofitting them takes planning, investment, and time.
The Current Legal Position Under MEES
The Minimum Energy Efficiency Standards (MEES) govern the energy requirements commercial landlords must meet before letting their properties. The rules have been progressively tightened since 2018, and the direction of travel is unambiguous.
Since 1 April 2018, landlords of non-domestic rented properties have only been permitted to grant a new tenancy if their property holds at least an EPC E rating. From 1 April 2023, this requirement extended to all privately rented non-domestic properties, covering existing tenancies as well as new ones.
So the current baseline is clear. Properties below EPC E require an upgrade or a registered exemption before they can be legally leased. Any property that falls short of that standard must be brought into compliance before any letting activity takes place.
Enforcement sits with local authorities and the consequences of getting it wrong are substantial. Landlords face civil penalties: for properties with a rateable value under £50,000, the fine is 10% of rateable value with a minimum of £5,000 and a maximum of £10,000. For properties with a rateable value of £50,000 or above, it rises to 20% of rateable value, up to a maximum of £150,000. These penalties apply per property, per breach. A landlord with several non-compliant units faces several fines simultaneously.
There is also a reputational dimension. Breaches are publicly listed, which affects how lenders, tenants, and investors view your portfolio.
Where the Rules Are Heading – The Road to EPC B by 2030
The current minimum is EPC E. The trajectory makes it clear that E is a temporary floor, with each successive phase raising the bar further.
The current Government has published proposed plans for future EPC reforms. If these proposals are adopted, from 1 April 2027 all let commercial properties will require a minimum EPC rating of C. The proposed trajectory then pushes the minimum to EPC B by 2030.
CBRE analysis reveals that if historic trends continued, around 60% of commercial stock could fail to comply with a B rating requirement by the 2030 deadline. The Climate Change Committee’s Seventh Carbon Budget argues that commercial and public real estate emissions need to fall by 87% by 2040 compared with 2023 levels.
Here is what that means in practice. Approximately 28% of commercial properties currently meet future minimum EPC standards, according to industry research. Local authorities enforce these regulations with penalties of up to £150,000 for breaches over three months.
But there is a catch. The final confirmation of the 2027 and 2030 deadlines still awaits formal legislation. Industry commentators expect the Department for Energy Security and Net Zero to confirm the next phase of MEES before the end of 2025, likely reaffirming the EPC B goal, with a deadline set somewhere between 2030 and 2035. The direction is set. The precise date remains subject to final confirmation. That uncertainty is a reason to act earlier, while contractors and costs are still manageable.
Exemptions – Real, But Narrow
MEES does provide for exemptions. Landlords who assume they qualify automatically, however, are taking a serious risk.
Exemptions apply where: the consent of a third party such as a tenant or local planning authority is required to carry out works but is refused; the improvements required would result in a devaluation of the property by 5% or more; all cost-effective improvements have been carried out and the property still falls short of an E rating; or the “seven-year rule” applies, whereby energy savings over seven years would fall below the cost of the improvement.
Exemptions require a formal application and registration on the PRS Exemptions Register. They carry a time limit of typically five years, after which landlords must reassess and reapply.
For industrial and warehouse properties in particular, the seven-year payback test is worth exploring. Large-scale insulation projects or heating system overhauls can carry significant upfront costs. A qualified energy assessor can model this properly.
The Practical Upgrade Path for Industrial, Commercial, and Retail Properties
So, why does all this matter if your property is currently EPC D or E and technically compliant? Because moving from E to C, and then from C to B, represents a significant step up for many older commercial buildings. Starting that journey now gives you time, cost control, and choice of contractor.
The most impactful upgrades for commercial and industrial properties tend to follow a clear sequence.
Insulation first. As much as 45% of heat is lost through walls and 20% through roofs in commercial buildings. For warehouses and large storage units, which tend to have large roof and wall surface areas, upgraded cladding or roof insulation often delivers the greatest improvement to an EPC rating. It is frequently the most cost-effective starting point.
Lighting is next. Lighting can account for up to 40% of total energy consumption in commercial buildings, according to the International Energy Agency. Switching to LED lighting with smart controls is one of the fastest, most straightforward wins available to landlords of retail units, offices, and industrial spaces.
Heating systems matter significantly. The type of heating in a commercial building has a large impact on EPC calculations. Gas and oil boilers drag ratings down. Modern alternatives, including electric systems aligned with low-carbon grid electricity, score better. For industrial units, options include destratification fans and infrared heating panels depending on the building profile.
Renewable energy. For older offices, warehouses, and retail units, solar PV is one of the most cost-effective upgrades available. When modelled correctly within SBEM, solar often provides the quickest route to EPC improvement, outperforming many fabric or mechanical upgrades in terms of return on investment.
One often-overlooked action is simply recommissioning the EPC assessment itself. Commissioning a new EPC to replace certificates granted before 2022, when the calculation methodology changed, can lead to an improved rating with zero capital expenditure required. If you hold an older certificate, it is worth reviewing before committing to any upgrade programme.
The Commercial Case Beyond Compliance
Compliance is necessary. The commercial case extends well beyond regulatory obligation, though.
Some 92% of UK property investors say tenants will pay a premium for greener homes and commercial premises, according to Handelsbanken’s latest Property Investor Report. Some 77% reported a surge in demand for heat pumps, solar panels, and electric vehicle charging points specifically.
Green credentials are increasingly a factor in tenant attraction and retention. Businesses with their own sustainability commitments actively seek premises that support those goals. A well-rated commercial property is easier to let and commands better terms. It also holds its value more effectively as the regulatory floor rises beneath less efficient stock. Properties that fail to improve risk becoming stranded assets.
For landlords financing through commercial mortgages, lenders are also beginning to factor EPC ratings into their lending decisions and risk assessments. A higher rating can support better lending terms.
What to Do Before the 2027 Compliance Window Opens
The proposed compliance window for the EPC C requirement opens as early as 2025, with the enforcement date set for April 2027. That window closes faster than most landlords expect. Retrofit projects for commercial buildings take time to plan, procure, and deliver. Demand for accredited energy assessors and specialist contractors will increase significantly as deadlines approach.
Here is a practical starting framework for commercial and retail landlords:
Audit your current position. Know the EPC rating of every property in your portfolio. Identify those rated D or E as priority assets. Check whether any certificates were issued before 2022 and may benefit from a fresh assessment.
Commission a professional improvement report. A qualified energy assessor will identify the most cost-effective upgrade pathway specific to your building type, tenure, and usage. Every building is different. A retail unit on a high street has different needs to an industrial shed outside a market town.
Plan phased investment. Spreading upgrade costs over a two to three year window is far more manageable than last-minute emergency retrofits. It also gives you time to align works with lease events, void periods, or planned maintenance cycles.
Review your lease terms. Landlords should review precedent leases to include provisions that facilitate energy efficiency improvements, restrict tenants from obtaining an EPC independently, and restrict alterations that may adversely affect the EPC rating. Getting the lease structure right protects your position.
Explore available support. Government and third-party funding schemes for commercial energy efficiency do exist. An energy consultant can identify what is available for your property type and location.
The Onward Holdings Perspective
At Onward Holdings, we manage a range of commercial and industrial property across Yorkshire and the wider North of England, from industrial units and logistics space to retail premises. We are navigating exactly these decisions across our own portfolio.
Our view is straightforward. The direction of travel on EPC regulation is clear. Compliance is a cost of operating in the commercial property market. Done well, the upgrade journey is also an opportunity to improve asset quality, attract better tenants, and build long-term portfolio resilience.
The landlords who start now will face lower costs and greater choice. Those who wait will face higher contractor costs, tighter timelines, and the very real risk of holding unlettable stock precisely when they most need rental income.
This article is intended for general information purposes only. For guidance specific to your property portfolio, we recommend consulting a qualified energy assessor and seeking independent legal advice on MEES compliance obligations.
EPC Ratings and Commercial Property: What Every Commercial Landlord in England Needs to Know Right Now
The rules are changing. Fast. If you own or manage commercial property in England and Wales, the energy performance of your buildings has become a hard commercial issue. It is a liability for those who ignore it, and a competitive advantage for those who move early. Which one it becomes depends entirely on what you do next.
Here is the thing: a significant portion of commercial landlords still treat Energy Performance Certificate (EPC) compliance as a future problem. The legislation is already live, enforcement is tightening, and the upgrade deadlines ahead are ambitious. Waiting is an expensive strategy.
At Onward Holdings, we operate across industrial, commercial, and retail property in the North of England. We know this issue at ground level. This article lays out what the current EPC regulations require, where the rules are heading, and what landlords holding commercial units, industrial sheds, or retail space need to do to protect their assets.
What Is an EPC and Why Does It Matter for Commercial Property?
An Energy Performance Certificate rates a building’s energy efficiency on a scale from A (most efficient) to G (least efficient). For commercial properties, the rating is calculated using government-approved software called the Simplified Building Energy Model (SBEM). It factors in insulation, heating systems, ventilation, lighting, and increasingly, on-site renewable energy generation.
Critically, the EPC carries real legal weight. Under current legislation, a poor EPC rating can make your property legally un-lettable. That has very real consequences for rental income, asset value, and your ability to refinance.
For warehouses, industrial units, and retail premises specifically, the scale of the challenge can be significant. Large roof and wall surface areas mean substantial heat loss. Many older commercial buildings were built with energy performance as an afterthought. Retrofitting them takes planning, investment, and time.
The Current Legal Position Under MEES
The Minimum Energy Efficiency Standards (MEES) govern the energy requirements commercial landlords must meet before letting their properties. The rules have been progressively tightened since 2018, and the direction of travel is unambiguous.
Since 1 April 2018, landlords of non-domestic rented properties have only been permitted to grant a new tenancy if their property holds at least an EPC E rating. From 1 April 2023, this requirement extended to all privately rented non-domestic properties, covering existing tenancies as well as new ones.
So the current baseline is clear. Properties below EPC E require an upgrade or a registered exemption before they can be legally leased. Any property that falls short of that standard must be brought into compliance before any letting activity takes place.
Enforcement sits with local authorities and the consequences of getting it wrong are substantial. Landlords face civil penalties: for properties with a rateable value under £50,000, the fine is 10% of rateable value with a minimum of £5,000 and a maximum of £10,000. For properties with a rateable value of £50,000 or above, it rises to 20% of rateable value, up to a maximum of £150,000. These penalties apply per property, per breach. A landlord with several non-compliant units faces several fines simultaneously.
There is also a reputational dimension. Breaches are publicly listed, which affects how lenders, tenants, and investors view your portfolio.
Where the Rules Are Heading – The Road to EPC B by 2030
The current minimum is EPC E. The trajectory makes it clear that E is a temporary floor, with each successive phase raising the bar further.
The current Government has published proposed plans for future EPC reforms. If these proposals are adopted, from 1 April 2027 all let commercial properties will require a minimum EPC rating of C. The proposed trajectory then pushes the minimum to EPC B by 2030.
CBRE analysis reveals that if historic trends continued, around 60% of commercial stock could fail to comply with a B rating requirement by the 2030 deadline. The Climate Change Committee’s Seventh Carbon Budget argues that commercial and public real estate emissions need to fall by 87% by 2040 compared with 2023 levels.
Here is what that means in practice. Approximately 28% of commercial properties currently meet future minimum EPC standards, according to industry research. Local authorities enforce these regulations with penalties of up to £150,000 for breaches over three months.
But there is a catch. The final confirmation of the 2027 and 2030 deadlines still awaits formal legislation. Industry commentators expect the Department for Energy Security and Net Zero to confirm the next phase of MEES before the end of 2025, likely reaffirming the EPC B goal, with a deadline set somewhere between 2030 and 2035. The direction is set. The precise date remains subject to final confirmation. That uncertainty is a reason to act earlier, while contractors and costs are still manageable.
Exemptions – Real, But Narrow
MEES does provide for exemptions. Landlords who assume they qualify automatically, however, are taking a serious risk.
Exemptions apply where: the consent of a third party such as a tenant or local planning authority is required to carry out works but is refused; the improvements required would result in a devaluation of the property by 5% or more; all cost-effective improvements have been carried out and the property still falls short of an E rating; or the “seven-year rule” applies, whereby energy savings over seven years would fall below the cost of the improvement.
Exemptions require a formal application and registration on the PRS Exemptions Register. They carry a time limit of typically five years, after which landlords must reassess and reapply.
For industrial and warehouse properties in particular, the seven-year payback test is worth exploring. Large-scale insulation projects or heating system overhauls can carry significant upfront costs. A qualified energy assessor can model this properly.
The Practical Upgrade Path for Industrial, Commercial, and Retail Properties
So, why does all this matter if your property is currently EPC D or E and technically compliant? Because moving from E to C, and then from C to B, represents a significant step up for many older commercial buildings. Starting that journey now gives you time, cost control, and choice of contractor.
The most impactful upgrades for commercial and industrial properties tend to follow a clear sequence.
Insulation first. As much as 45% of heat is lost through walls and 20% through roofs in commercial buildings. For warehouses and large storage units, which tend to have large roof and wall surface areas, upgraded cladding or roof insulation often delivers the greatest improvement to an EPC rating. It is frequently the most cost-effective starting point.
Lighting is next. Lighting can account for up to 40% of total energy consumption in commercial buildings, according to the International Energy Agency. Switching to LED lighting with smart controls is one of the fastest, most straightforward wins available to landlords of retail units, offices, and industrial spaces.
Heating systems matter significantly. The type of heating in a commercial building has a large impact on EPC calculations. Gas and oil boilers drag ratings down. Modern alternatives, including electric systems aligned with low-carbon grid electricity, score better. For industrial units, options include destratification fans and infrared heating panels depending on the building profile.
Renewable energy. For older offices, warehouses, and retail units, solar PV is one of the most cost-effective upgrades available. When modelled correctly within SBEM, solar often provides the quickest route to EPC improvement, outperforming many fabric or mechanical upgrades in terms of return on investment.
One often-overlooked action is simply recommissioning the EPC assessment itself. Commissioning a new EPC to replace certificates granted before 2022, when the calculation methodology changed, can lead to an improved rating with zero capital expenditure required. If you hold an older certificate, it is worth reviewing before committing to any upgrade programme.
The Commercial Case Beyond Compliance
Compliance is necessary. The commercial case extends well beyond regulatory obligation, though.
Some 92% of UK property investors say tenants will pay a premium for greener homes and commercial premises, according to Handelsbanken’s latest Property Investor Report. Some 77% reported a surge in demand for heat pumps, solar panels, and electric vehicle charging points specifically.
Green credentials are increasingly a factor in tenant attraction and retention. Businesses with their own sustainability commitments actively seek premises that support those goals. A well-rated commercial property is easier to let and commands better terms. It also holds its value more effectively as the regulatory floor rises beneath less efficient stock. Properties that fail to improve risk becoming stranded assets.
For landlords financing through commercial mortgages, lenders are also beginning to factor EPC ratings into their lending decisions and risk assessments. A higher rating can support better lending terms.
What to Do Before the 2027 Compliance Window Opens
The proposed compliance window for the EPC C requirement opens as early as 2025, with the enforcement date set for April 2027. That window closes faster than most landlords expect. Retrofit projects for commercial buildings take time to plan, procure, and deliver. Demand for accredited energy assessors and specialist contractors will increase significantly as deadlines approach.
Here is a practical starting framework for commercial and retail landlords:
Audit your current position. Know the EPC rating of every property in your portfolio. Identify those rated D or E as priority assets. Check whether any certificates were issued before 2022 and may benefit from a fresh assessment.
Commission a professional improvement report. A qualified energy assessor will identify the most cost-effective upgrade pathway specific to your building type, tenure, and usage. Every building is different. A retail unit on a high street has different needs to an industrial shed outside a market town.
Plan phased investment. Spreading upgrade costs over a two to three year window is far more manageable than last-minute emergency retrofits. It also gives you time to align works with lease events, void periods, or planned maintenance cycles.
Review your lease terms. Landlords should review precedent leases to include provisions that facilitate energy efficiency improvements, restrict tenants from obtaining an EPC independently, and restrict alterations that may adversely affect the EPC rating. Getting the lease structure right protects your position.
Explore available support. Government and third-party funding schemes for commercial energy efficiency do exist. An energy consultant can identify what is available for your property type and location.
The Onward Holdings Perspective
At Onward Holdings, we manage a range of commercial and industrial property across Yorkshire and the wider North of England, from industrial units and logistics space to retail premises. We are navigating exactly these decisions across our own portfolio.
Our view is straightforward. The direction of travel on EPC regulation is clear. Compliance is a cost of operating in the commercial property market. Done well, the upgrade journey is also an opportunity to improve asset quality, attract better tenants, and build long-term portfolio resilience.
The landlords who start now will face lower costs and greater choice. Those who wait will face higher contractor costs, tighter timelines, and the very real risk of holding unlettable stock precisely when they most need rental income.
This article is intended for general information purposes only. For guidance specific to your property portfolio, we recommend consulting a qualified energy assessor and seeking independent legal advice on MEES compliance obligations.