Over half of London offices could be unlettable under new MEES

Almost half of London’s commercial stock could be unlettable from 2027 due to changes in energy efficiency regulations, while almost 8% could be unlawful for new lettings from April 2023.

Under the new Minimum Energy Efficiency Standards (MEES), set to be introduced next month, buildings in England and Wales with an energy efficiency rating lower than ‘E’ cannot be let, even if they are in the middle of a contract term.

These findings from BNP Paribas Real Estate were based on a December 2022 review of eligible buildings, including those with exemptions.

According to the analysis, nearly 43% of commercial properties in London, rated D and E, could be non-compliant with MEES from April 2027. This percentage, when combined with the 8% of buildings already rated F and G, means that over 50% of the city’s commercial stock may be unlawful to let under the proposed MEES changes.

The study also found that just over 26% of properties are rated C, and could become non-compliant with MEES from April 2030.

Only 23% of the stock is currently fully MEES-compliant under current legislation, with ratings of A+, A, or B.

These findings highlight the need for property owners and managers to take steps to ensure their buildings meet MEES requirements to avoid potential legal and financial consequences.

Stephen Wolfe, head of commercial at BNP Paribas Real Estate, commented: “The inflationary effects of post pandemic shortages, the Ukraine war, and the cost-of-living crisis have driven up energy and material prices, leaving many landlords at a standstill with rating changes on the horizon.”

Donna Rourke, head of ESG and sustainability at BNP Paribas Real Estate, added: “Many landlords are still in the dark about MEES changes. For others, there is a trade-off taking place with their occupiers on where the lease obligations lie in undertaking works. It’s crucial at this time to get works done and get it right, and given that there are such disparities between ratings, ensuring you consult with an expert is more important than ever.

“Improvements that we would recommend for those at a very minimum term include establishing responsibility first and foremost, ensuring your exemptions have been registered to secure the necessary time to make upgrades, and looking at modifications such as replacing boilers and windows, upgrading insulation, and adding solar panelling dependant on budget. This can marginally support an upgrade in rating and can protect and support rents and occupancy in the process.”