11.9m sq ft of Energy Inefficient Office Stock Coming to London Market

Up to 11.9 million sq ft of office stock due to be released to central London’s market by the end of 2027 has an EPC lower than C – or categorised as energy inefficient – according to new research by CBRE UK.

CBRE estimates around 15.9 million sq ft of Central London office space will be released back into the market by the end of 2027 due to upcoming large lease expiry events. EPC data is available for around 80% of this stock or 12.6 million sq ft. Of this, only 6% is classified as energy efficient with an EPC of A or B while 94% (11.9 million sq ft) has an EPC lower than C, and is therefore categorised as energy inefficient based on Sustainable Finance Disclosure Regulation definitions.

Using proprietary retrofit data, the real estate advisor predicts the cost of upgrading this stock to energy efficient standards could be up to £370 million. This sum does not include unrelated building improvements, and equates to around 9% of this stock’s estimated capital value.

CBRE’s analysis, based on trends from its new Sustainability index, indicates that if the 11.9m sq ft is not upgraded to higher energy efficiency standards it will experience a sharp fall in capital value. In contrast, we expect upgraded stock to have more resilient capital values.  CBRE predicts the £370 million of capital expenditure for upgrading the stock could be offset by more resilient capital values within three years.

Sam Carson, Head of Sustainability, Valuation & Advisory Services at CBRE UK said the main reason for this surprisingly short ‘payback period’ is the rapid erosion of value for inefficient assets.