What Do Evolving EPC Regulations Mean for Tenants?

What Do EPC Regulations Mean For Office Tenants Now and in the Future?

Energy Performance Certificate (EPC) standards are set to reshape London’s office market – and not just for landlords. Since 1 April 2018 the EPC standard was only checked when a landlord started a new tenancy or renewed an existing one. From 1 April 2023, however, landlords must always maintain at least an EPC E rating for their properties, even if the tenancy hasn’t changed.

The government’s evolving roadmap proposes raising this standard further – with interim improvements expected by 2027 and a target of a ‘B’ rating for non‑domestic (commercial) properties in the future. These proposals remain subject to further consultation and possible revision.

For office tenants, this means a future where energy efficiency, sustainability, and overall workspace quality are at the forefront of every leasing decision.

As landlords and developers invest in modernising properties through enhanced insulation, upgraded heating and cooling systems, and smart technology integration, tenants can expect more comfortable, cost‐efficient, and environmentally responsible workspaces. These improvements set a clear benchmark for energy efficiency, promote sustainable practices, and enhance occupant well‐being while reducing running costs.

In this article, we explore the details and ongoing discussions around EPC regulations and what future energy performance targets will mean for those renting offices in London – specifically in the commercial sector.

1. What Are the Current EPC Regulations?

Energy Performance Certificates (EPCs) are a mandatory requirement for all commercial buildings let in England and Wales – ensuring a standardised measure of energy efficiency. Rated from A+ (the most efficient) to G (the least efficient), EPCs guide landlords, tenants, and developers alike. Under current rules, properties must score at least an ‘E’ to be legally let. However, the evolving government roadmap suggests that by April 2027, an interim rating of ‘C’ may come into effect – eventually rising to a target of a ‘B’ rating for non‑domestic properties in the future.

This progressive tightening of standards is designed to reduce carbon emissions, lower running costs, and enhance the overall quality of office spaces. For tenants, these improvements translate into healthier, more modern environments with the potential for lower utility bills. They should expect significant building upgrades.

Landlords will also be compelled to retrofit older properties to meet the new requirements, which might involve temporary disruptions or even office relocations. In the long term, however, benefits include improved air quality, reduced energy consumption, and workspaces designed for modern business needs.

Law firm Clyde & Co notes that landlords of commercial properties must take action now to audit their portfolios and plan for an increase in the Minimum Energy Efficiency Standards (MEES). Landlords are required to have an EPC conducted by a certified energy assessor, with assessments covering building features such as window quality, insulation levels, heating systems, and any renewable energy devices. Two main methodologies are used: the Standard Assessment Procedure (SAP) for new or significantly altered properties, and the Reduced Data Standard Assessment Procedure (RdSAP) for existing buildings.

2. What Exemptions and Special Circumstances Apply?

While the EPC regulations cover a wide range of commercial properties, there are several exemptions designed to accommodate unique circumstances. For example, buildings that are listed or officially protected may be exempt if energy efficiency upgrades would alter their historical character, thereby preserving important architectural heritage. Similarly, temporary buildings intended for use for less than two years and places of worship are not subject to these strict standards.

Additional exemptions apply to industrial sites, workshops, non-residential agricultural buildings with low energy demands, and detached structures under 50 square metres. In cases where the cost of the cheapest upgrade exceeds £3,500 (even after Government funding) or the projected payback period is over seven years, property owners may qualify for a high-cost or payback exemption. New landlords are also given a six-month grace period to implement necessary improvements.

For tenants, it’s crucial to understand whether your building qualifies for an exemption. While an exempt space might avoid immediate disruptions, the long-term benefits of operating in a fully modernised, EPC-compliant workspace remain significant.

3. How Will EPC Improvements Enhance Office Space Quality for Tenants?

The drive towards higher EPC ratings is catalysing major investments in office space upgrades. Tenants can look forward to environments transformed by modernisation efforts – featuring enhanced insulation, state-of-the-art HVAC systems, and smart lighting controls that leverage smart technologies. These improvements not only reduce energy bills but also create more comfortable and inviting workspaces.

Integrating sustainable design principles results in offices that offer better thermal comfort, improved air quality, and a suite of energy-efficient technologies. With these EPC improvements on the horizon, such enhancements will soon become the industry norm, ensuring that workspaces are both compliant and designed for the future.

4. How Do Enhanced EPC Standards Impact Tenant Satisfaction and Attraction?

Modern offices that achieve high EPC ratings are fast becoming magnets for businesses. Tenants benefit from lower energy bills and improved indoor environments, which support overall well‐being. In today’s competitive market, workspaces that combine modern design with superior energy efficiency are key to attracting top talent and keeping employees satisfied.

As future revisions to EPC methodologies incorporate more accurate assessments of real-world energy performance and the benefits of low‑carbon technologies, office spaces will offer measurable improvements in air quality and thermal comfort. These enhanced conditions foster productivity and create a more appealing environment for both current and prospective tenants.

5. What Are the Current Trends and Future Lease Implications?

Recent studies indicate that approximately 87% of London’s office stock in major UK markets is rated ‘C’ or below. With standards expected to tighten based on enhanced methodologies that capture real energy performance more accurately, many existing offices will require significant upgrades. This shift will directly affect lease trends – with properties boasting superior ratings often securing longer lease terms and higher tenant demand.

Tenants may soon face the prospect of relocating or renegotiating lease terms as properties are upgraded to meet these evolving standards. While short-term lease costs might rise, long-term operational savings and an improved working environment offer substantial benefits.

Data across various submarkets further illustrates this challenge:

As a result, many tenants may soon face the prospect of relocating or renegotiating lease terms as properties are upgraded to meet these new standards. While short-term lease costs might rise, long-term operational savings and an improved working environment offer substantial benefits.

6. What Are the Upgrading Costs and Financial Considerations?

For landlords, the path to compliance involves significant investment – costs that are sometimes passed on to tenants. However, these expenditures drive operational savings over time. Upgraded HVAC systems, modern lighting, and improved insulation can considerably reduce energy consumption. Moreover, enhanced energy efficiency improves comfort and leads to lower utility bills, which can help offset any rent increases.

It’s a balancing act: while tenants might face higher lease costs initially, the long‐term financial benefits from reduced operational expenses and improved sustainability can offer a compelling return. Close collaboration with landlords during lease negotiations is essential to ensure that the costs of compliance are managed effectively.

7. How Do Development and Refurbishment Affect the Tenant Experience?

The pressure to meet evolving EPC standards is prompting widespread refurbishment and new developments across London. Developers are now incorporating high-performance building envelopes, energy-efficient HVAC systems, and smart technologies from the ground up. Existing properties are also being retrofitted with improved insulation, upgraded glazing, and renewable energy solutions such as solar panels.

For tenants, these upgrades translate into workspaces that are not only compliant with future regulations but also designed to enhance everyday experiences – from improved air quality and thermal comfort to modern, aesthetically pleasing environments. The transition to more rigorous and holistic EPC assessments will ultimately result in workspaces that are both cutting-edge and cost-effective.

8. How Is the Landscape of Office Letting Shifting?

Compliance with stringent EPC standards is quickly becoming a decisive factor in the office letting market. Properties with strong EPC ratings enjoy lower vacancy rates and more favourable lease terms, as tenants increasingly seek spaces that promise reduced running costs and better working environments.

Conversely, buildings that fail to meet these enhanced energy efficiency benchmarks may struggle to attract quality tenants, potentially resulting in higher vacancy rates and long-term financial repercussions. As the market adapts to more accurate and comprehensive assessments of energy performance, landlords will be under increasing pressure to innovate and upgrade their properties to remain competitive.

9. How Can K2 Space Support Your Transition?

At K2 Space, we combine over 20 years of industry expertise with a passion for sustainable, innovative design. As London’s leading office design and fit‐out company, we help businesses navigate the complex landscape of EPC compliance while creating inspiring, functional workspaces.

Our comprehensive services – from office design and build to refurbishment and furniture consultancy – ensure that your workspace both meets current EPC standards and is future‑proofed against upcoming challenges. Whether you’re facing a relocation or looking to upgrade your current office, our expert team is here to guide you through every step of the transition to an energy-efficient environment.