Commercial EPC B by 2031

The government has now provided long-awaited direction on the future of minimum energy efficiency standards (MEES) for the non-domestic private rented sector in England and Wales. In an interim response on 18 June 2026, it confirmed that, from 2031, privately rented non-domestic buildings over 1,000 square metres will need to reach EPC B, where cost-effective. The previously proposed 2027 EPC C milestone will not be taken forward.

That is an important policy development for the commercial property market. In our view, the significance is not limited to compliance - it also affects asset strategy, capital planning and leasing decisions well before 2031 arrives. For landlords now faced with this deadline, it is key that the costings of these enhancements are planned for, including consideration of the available capital allowances.

What the government has announced

The current legal position remains the same for now. Most privately rented non-domestic properties in England and Wales will still need to meet a minimum EPC E standard unless a valid exemption applies. Since 1 April 2023, that requirement has also applied across all privately rented non-domestic properties, even where there has been no change in tenancy.

What has changed is the government’s stated future direction. Rather than applying a tighter standard across the whole non-domestic rented market, the government has proposed a more targeted approach. Private rented buildings over 1,000 square metres would need to achieve EPC B by 2031, where cost-effective, while buildings below that threshold are intended to remain subject to the current EPC E minimum standard.

The government has also said that existing flexibility mechanisms, including the seven-year payback test and exemptions, will remain in place. However, it is important to be clear that the proposed move to EPC B for larger buildings is not yet fully enacted law and will only take effect following the successful passage of secondary legislation through parliament.

Why does this matter for the market?

On one level, this announcement gives the market a clearer timetable after a prolonged period of uncertainty, which is helpful. The confirmation of a 2031 deadline, the removal of the proposed 2027 interim milestone, and the retention of cost-effectiveness safeguards all point to a more targeted and proportionate policy design.

However, in our view, the more important point is that this should not be treated as a narrow compliance update. Commercial real estate decisions are made around lease events, refinancing, refurbishment windows, disposal planning and capital budgeting. For that reason, an intended compliance date of 2031 will still influence business decisions several years earlier.

Declaration of this deadline will mean that owners will need to now actively assess their property portfolio to consider whether they are fit for purpose, in need of upgrading or should be divested.

The wider retrofit challenge

The scale of the challenge remains considerable. Industry estimates state that around 73% of UK commercial property has an EPC rating of C or below, meaning that roughly £600 billion to £800 billion of commercial assets may sit below the intended future standard.

Analysis by the British Property Federation earlier in 2026 stated that across major English cities, found that 81% of commercial buildings were still below EPC B, suggesting that a substantial proportion of stock remains misaligned with the direction of future regulation and wider market expectations.

For many buildings, delivery of retrofit works is unlikely to be straightforward. Technical limitations, cost constraints, tenant disruption, access issues and capital programme sequencing may all affect what can be delivered and when. That is why, in our view, the period between now and 2031 will quickly pass and requires active management now by property owners. The policy update is best read as greater clarity, not reduced urgency.

For owners and investors, the more useful response is likely to be portfolio triage. That means identifying which assets are most likely to fall within the proposed 2031 EPC B regime, assessing whether current EPC data remains reliable, and aligning potential upgrade works with lease events, refinancing activity and wider capital expenditure programmes.

In practice, this may include:

• identifying assets over 1,000 square metres that are likely to fall within the intended future regime
• reviewing whether EPC ratings still accurately reflect building performance or whether reassessment may be needed
• mapping possible retrofit works against lease expiries, break clauses, void periods and refurbishment plans
• understanding where exemptions or the seven-year payback test may apply, while recognising that these are not a substitute for a broader strategy
• considering which assets remain commercially important and which may face greater long-term obsolescence risk.

That, in our view, is where the announcement has the greatest practical relevance. The legal detail is still developing, but the strategic message to the market is now much clearer.

Practical implications for owners, investors and occupiers

For owners, this is likely to be a prompt to review whether existing business plans properly reflect future energy performance requirements for larger buildings. For investors and lenders, EPC performance may increasingly feed into asset quality, capex assumptions and downside risk analysis. For occupiers, the quality and efficiency of a building may continue to shape location decisions, especially where energy costs and broader sustainability objectives remain a priority.

This does not mean every building below EPC B will face the same outcome, nor that every owner should respond in the same way. The government has retained a framework that recognises cost-effectiveness and practical constraints. But in our view, businesses should avoid assuming that regulatory flexibility removes the need for early action.

Conclusion

The government’s latest MEES announcement is an important development because it gives the commercial property market a clearer indication of the likely future standard for larger privately rented buildings in England and Wales. The proposed move to EPC B by 2031, combined with the removal of the proposed 2027 EPC C milestone, gives businesses more clarity on the policy direction, even though the necessary secondary legislation and fuller guidance are still to come.

Our view is that this should be seen as more than a compliance update. It is also a prompt for businesses to think carefully about asset resilience, retrofit timing and long-term investment priorities. Those who review their portfolios early are more likely to retain flexibility. Those who delay may find that the compliance deadline is only one part of a wider commercial challenge.

If you would like to discuss how these developments may affect your portfolio, property strategy or due diligence process, please get in touch with your usual Crowe contact.