Energy efficiency concerns drive asset value fears

26 May 2026

Energy inefficiency is driving sharp falls in UK commercial property valuations, with institutional investors warning that up to half of some portfolios could become financially stranded within five years if performance is not improved.

Research from re:sustain, based on a survey of 50 UK commercial real estate fund managers, found that all respondents reported having stranded assets in their portfolios. These are buildings that no longer meet energy efficiency standards or investor environmental, social and governance requirements.

The study highlights the scale of recent losses, with 64% of fund managers reporting valuation declines of between 11% and 30% over the past three years. A further 28% said asset values had fallen by 31% to 40%, indicating more severe devaluations across nearly a third of portfolios.

Looking ahead, 66% of respondents expect the volume of stranded assets to increase by up to 25% over the next five years. A further 24% warned that between 25% and 50% of their holdings could become stranded if energy efficiency issues are not addressed.

The findings suggest investors are shifting strategy in response to mounting pressure. While 59% of managers plan to upgrade heating, ventilation and air conditioning systems, 48% are prioritising operational optimisation technologies, such as improved system controls, scheduling and performance management. Meanwhile, 41% are considering demolition of poorly performing buildings entirely.

Remote optimisation tools are emerging as the most favoured solution, with 76% of fund managers saying they believe such technology will have the greatest impact on improving energy efficiency. This compares with 66% who pointed to more traditional hardware upgrades, such as lighting or HVAC replacements.

Katie Whipp, chief business officer at re:sustain, says:

“The commercial real estate sector has reached a tipping point where energy performance is no longer a ‘nice to have’ but a fundamental driver of liquidity and valuation. The research shows that managers are moving away from the slow-burn of traditional construction retrofits in favour of agile, data-led interventions. They are looking for quick results that protect asset value without the prohibitive capex of a structural overhaul.”

Despite this shift, operational challenges remain significant. A total of 74% of respondents cited disruption from major retrofit works as a key barrier to improving energy performance, while 64% highlighted fragmented energy data trapped in legacy systems. In addition, 60% expressed concerns about cybersecurity risks linked to smart building technologies.

Technology adoption is now close to universal in the sector, with 90% of UK fund managers describing technology as an important part of their energy strategy, including 14% who said it is highly important.

Investment is also expected to rise, with 70% forecasting increased spending on energy efficiency technology over the next three years, including 10% expecting a significant increase.