What is the impact of MEES’s clarity for UK property investors and developers?

This article was originally published in CoStar.

For years, the UK property market has waited for clarity from the Government on Minimum Energy Efficiency Standards (MEES) for non-domestic properties. Last month, we received some clarity, and relatively out of the blue. In my view, this is good news for the UK property market, as low-energy buildings move from ambition to requirement.

The Government intends to implement by 2031 for all privately rented buildings over 1000m² in England and Wales to be EPC B, where cost-effective. The decision to target buildings with a floor area over 1,000m² is efficient. According to the 2025 ND-NEED 2024 dataset, only around 7% of non-domestic buildings fall above the proposed threshold. However, this 7% is disproportionately responsible for circa 60-70% of energy consumption within England & Wales. 

From an energy and carbon perspective, there is therefore a clear logic to targeting the larger buildings first, as it focuses regulation on buildings where the greatest absolute energy savings are likely to be achieved with the lowest impact. So rather than spreading the burden thinly, the approach focuses on where the greatest impact can be. Given the discussion around cost and deliverability of net zero, the Government has chosen a pragmatic approach.

The risk, however, is that the regulations leave a long tail of inefficient, smaller properties outside the strengthened requirements. For these smaller properties, the drivers will remain market-led, with tenants seeking to reduce energy costs or meet internal sustainability commitments, applying pressure on landlords to improve building performance. 

Similarly, investors may continue to price in retrofit liability, even where the immediate regulatory requirement is reduced or removed. EPC risk is increasingly relevant to investment underwriting, lending due diligence and asset valuation. This aligns with the direction of RICS guidance, which reinforces the need for valuers to consider sustainability and ESG factors where they are material to value.

The effect may therefore not be a simple binary distinction between compliant and non-compliant assets. Investors are likely to consider retrofit costs, lease event timing, liquidity, tenant demand, capex exposure, and the risk that an asset becomes less attractive to lenders or occupiers. 

There is also a wider European comparison. For cross-border investors, the relevant question is no longer whether energy performance regulation exists, but how each market’s requirements differ in timing, threshold, asset class, enforcement and cost-effectiveness tests. In that context, the Government update gives investors a clearer basis for comparison with equivalent minimum performance regimes elsewhere in Europe.

MEES is certainly not new news. The Government held two consultations on it, one in 2019 and another in 2021. So, the change we should anticipate now is confidence, as investors can now go to their boards and say, “This is happening.”

There are still important unanswered questions. We don’t yet have clarity on how the regulations will be enforced, or even who will enforce them. If this responsibility remains with local authorities, there will be legitimate concerns about resourcing. Enforcement has been weak to date, and without improvement, the policy’s full impact may not be realised.

There are also technical ambiguities, such as whether compliance applies at a building level or can be navigated through multiple EPCs on smaller floor areas. These details matter, and they will shape behaviour.

But none of that changes the underlying direction. For investors who have already accounted for this regulation change, this is simply “continue as usual”. They were already targeting EPC B. The real shift will come from those who haven’t yet engaged and are holding F and G-rated assets with no clear plan. 

Further Government detail is expected to come in an official response to the previous consultation, with hopefully, clarity on how the 1,000 m² threshold will be applied for multi-let buildings and properties with multiple EPCs.