Commercial landlords unaware of EPC standards change

Energy efficiency rule change also adding to cost of living and interest rate concerns for SME landlords

Nearly two-fifths (39%) of commercial landlords are unaware of new standards on Energy Performance Certificates (EPCs) coming into force in April 2023, new research* from property business experts Handelsbanken shows, underlining the confusion in the market and need for longer-term planning.

The study found just one in 10 (9%) commercial landlords has an EPC rating of E or above for all of their properties – new legislation from April next year means all commercial rented properties in England and Wales will need an EPC rating of at least E in order to continue being let. Currently, an EPC rating of at least E is a legal requirement for commercial properties before they can receive a new or renewal lease and this is being extended to both new and existing commercial leases next year.

Around a sixth (16%) of commercial landlords surveyed said they are planning to sell their properties as they find the new EPC requirements too daunting, primarily as they cannot afford to make the requisite changes. That leaves 74% who need to upgrade their portfolios.

Many landlords are taking steps to upgrade their properties, with 42% of respondents planning to install insulation, while 36% will invest in an energy efficient boiler, and 35% say they will buy newer properties instead of older, less energy efficient properties. Nearly a third (30%) will fit double glazing.

Handelsbanken’s research shows commercial landlords in general are planning to invest in their portfolios over the coming months to improve energy efficiency. The average investment per portfolio is expected to be £95,400, or 3% of the portfolio’s total value.

There is still uncertainty in the market on how to implement changes. The main reasons given among those without a plan, were that regulation makes it too difficult to do so (42%), a lack of knowledge about what changes to make (38%), and not believing that they can access the right finance (14%).

Barriers against making portfolios more sustainable All respondents
The regulations make it too difficult 42%
I don't have enough knowledge about how to make my portfolio more sustainable 38%
I don't believe I could access the finance I'd need 14%
I don't have the Capex to invest in making it more sustainable 12%
Some / all of my property is listed so making upgrades is too difficult 10%

Richard Winder, UK Head of Sustainability at Handelsbanken said: 

“It is worrying that so many landlords declared themselves unaware of the April 2023 deadline, though there are signs many are taking action, for example by investing in double glazing and extra insulation. 

"Although money is getting tighter right now, the rise in fuel costs and further planned hikes in energy efficiency standards make carbon-reducing measures a smart investment for landlords and tenants alike.  

"Landlords will want to start by consulting their existing Energy Performance Certificates, to find the most cost-effective route to a higher energy-efficiency rating. 

At the same time, we would guide them towards taking a broader, longer-term view of sustainability, for instance by considering a property's resilience to heatwaves or severe weather, and how it might better support green transport choices and biodiversity."

To read about this and other insights, please read the full property survey report:

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Notes to Editors

• *Research conducted by PureProfile in June 2022 among 120 UK professional landlords with a minimum of four properties in their portfolio. On average respondents own 7.5 properties with an estimated total market value of £2.76 million. All landlords questioned have exposure to residential property and 58% have exposure to commercial property

Information on Handelsbanken plc

Handelsbanken is the trading name of Handelsbanken plc, which is incorporated in England and Wales with company number 11305395. Registered office: 3 Thomas More Square, London, E1W 1WY, UK. Handelsbanken plc is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Financial Services Register number 806852.

Handelsbanken plc is a wholly-owned subsidiary of Svenska Handelsbanken AB (publ).

Handelsbanken was established in Stockholm in 1871 and in Sweden, it is one of the country’s leading banks with a nationwide branch network. The Bank’s home markets are Sweden, Norway, the Netherlands, and the UK. It also has operations in Luxembourg and the USA.

In the UK, Handelsbanken is a relationship bank with a decentralised way of working, a strong local presence due to a nationwide network of branches, and a long-term approach to customer relations. Handelsbanken specialises in providing personalised and competitive banking services to both businesses, individuals, and property investors, and offers wealth and investment management services through its UK subsidiary Handelsbanken Wealth & Asset Management. Each Handelsbanken branch operates as a small business enabling it to make decisions at a local level and provide a bespoke service. The focus is always on the need of the individual customer and not on the sale of specific products.

For information regarding sustainability at Handelsbanken, please see here: