As much as 85% of UK office buildings are at high risk of being unlettable due to EPC regulations proposed to be implemented in 2027, according to data by PwC UK.
The minimum EPC rating of E was required for commercial landlords from April this year, with the minimum rating expected to be raised further to C by 1st April 2027 and B by April 2030.
“With a potential update to the EPC regulation for commercial real estate targeted for 2027, the clock is ticking to ensure office stock meets the refreshed rules,” commented Mark Addley, real assets deals leader at PwC UK.
“Even if the legislation timing slips, tenant expectations around ESG credentials will remain.”
The research revealed that the risk is spread across the UK, with hotspots occurring in the South East, the North West and central England for buildings rated C or below.
While London may house the largest collection of properties, the Midlands is the most at risk of stranded assets with the highest number of F- and G-rated office assets.
Rob Walker, leader of real estate at PwC UK, said: “With the pandemic fundamentally changing the way we work, plus ongoing macroeconomic shifts, it's clear that the office sub-sector has been particularly negatively impacted.
“There are multiple headwinds from rising inflation and increased construction costs to significant labour shortages and skills gaps.
“All this adds up to developers — hoping to get ahead of the possible changing EPC requirements — facing a steep challenge.
“The good news is that there is a new office stock in the pipeline, which will meet the demand from tenants who hope to occupy space with strong ESG credentials.
“However, the drive for such facilities and amenities puts further pressure on CapEx requirements, plus construction as an activity remains a major contributor of greenhouse gas (GHG) emissions worldwide.
“And with a shortage of bricklayers, plasterers, roofers and carpenters, the sector faces a series of stark choices to get ahead of the game.”
