Uncertainty over future energy efficiency rules for commercial property is beginning to weigh on deal-making and refinancing activity, according to Propertymark.
In a letter to Martin McCluskey MP (main picture, inset), Minister for Energy Consumers at the Department for Energy Security and Net Zero, the agent trade body has called on the Government to urgently clarify its plans for non-domestic Minimum Energy Efficiency Standards (MEES).
The warning follows the publication of the Government’s Warm Homes Plan, which confirmed that privately rented homes must achieve an EPC rating of C by 2030.
While the announcement provides greater clarity for residential landlords, Propertymark said commercial agents and investors remain in the dark over what standards will apply to non-domestic buildings.
NO FORMAL FRAMEWORK
For several years, the market has assumed that commercial properties could be required to meet an EPC rating of B by 2030. However, no formal policy framework has been set out, leaving lenders, borrowers and advisers without certainty over future compliance costs, exemptions or enforcement.
Propertymark said agents are increasingly being asked to advise landlords and tenants on long-term investment decisions, lease terms and asset management strategies without knowing whether properties will remain lettable or financeable under future rules. This uncertainty, it warned, risks delaying transactions, refurbishment projects and refinancing activity.
The organisation highlighted growing concern around older and secondary commercial stock, including high street retail and mixed-use buildings, where retrofit costs can be significant and values more sensitive to regulatory change.
Without clear timelines or support mechanisms, landlords may defer upgrades or withdraw from the market, reducing stock and increasing risk for lenders.
UNDERWRITING PROBLEMS
Propertymark also cautioned that uncertainty around MEES is colliding with other policy proposals, including elements of the English Devolution and Community Empowerment Bill, such as potential changes to rent review clauses and end-of-lease arrangements.
Together, these could complicate underwriting assumptions and exit strategies, particularly for short-term and transitional finance.
In the residential sector, Propertymark said landlords face substantial upgrade requirements to meet the EPC C target within a relatively short timeframe, often without clarity on long-term funding or delivery flexibility.
It warned that poorly sequenced regulation risks constraining rental supply rather than accelerating energy improvements.
LACK OF DETAIL
The trade body said the lack of detail on interim targets, exemptions, enforcement and financial support makes it difficult for landlords, borrowers and lenders to plan responsibly.
Agents are reporting rising concern from clients over who bears the cost of improvements, how upgrades affect valuations, and whether properties could become unlettable if standards are introduced abruptly.
Propertymark has requested meetings with ministers to discuss the technical detail of the Warm Homes Plan and is calling for a clear, phased roadmap for non-domestic MEES.
Without swift clarity, it warned, regulatory uncertainty risks becoming a growing factor in stalled transactions, delayed exits and reduced investment across the commercial property market.
