New Environmental Standards Threaten 10% of London Office Spaces


New workspace standards being implemented in 2023 have the potential to threaten a large proportion of London’s commercial properties. 

According to one of the UK’s leading property agents, one tenth of London offices could become unusable in the next two years if standards are not met.


Environmental Standards


As the world strives to be more environmentally conscious, the commercial property market is no difference, with strict efficiency standards coming into force across England and Wales in 2023.

With that, landlords need to invest heavily in order to meet the new minimum energy and efficiency standards for london offices. Under these new standards, it will also be an offence to rent an office with a subpar energy performance certificate.


20m Square Feet of London


According to data from Colliers, there is around 20m square feet of London workspace deemed unusable in line with these new standards. Buildings must have an energy performance certificate with a rating of E or above; although, currently, roughly 10% of the market is made up of F and G rated buildings.

Around two-thirds of London’s existing commercial property market is rated D to G and due to be upgraded in the following years. Currently, the government is in discussions about legislation which legitimises just A and B rated commercial buildings by 2030.


Landlords Loss


Landlords are set to face serious financial implications if they fail to upgrade their buildings. In an uncertain time following the pandemic, landlords now have to decide whether they want to invest thousands of pounds into their office buildings, or leave the buildings abandoned as valuleless assets.

According to expert analyst Mike Prew, refurbishment costs will be at their highest for F and G rated offices. Decarbonising these high-gas-consumption buildings will affect even the country’s wealthiest developers.

Using Landsec and British Land as an example, Prew predicts that each will need to pay around 4% of their net asset values in order for their property portfolios to meet the discussed 2030 standards (that is around £250 million).


Ghost Town


Making a building more energy efficient and upgrading the rating takes a lot of work. Not only does it rely on a huge amount of financial investment, it also requires experience and the desire to actually undertake such a big project. This will deter many developers from undergoing the refurbishment.

With more developers unwilling or unable to transform their buildings, much of London’s existing workspace could be rendered obsolete after the new standards are introduced. As offices become less relevant for more companies, this could propel the working world even further into hybrid working or fully remote workforces.

Pilcher London
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