Revealed: Risk of Stranded Assets Increases, as MEES Compliance Slows

Why It Matters

Slower retrofitting escalates the risk of stranded assets, pressuring valuations and tightening financing for commercial real‑estate owners.

Key Takeaways

• EPC A/B registrations fell 22% from 2023 peak
• Offices hold 48% of F/G EPC bands in 2025
• Upgrade costs average $130‑$260 per sq ft, straining owners
• Slow MEES compliance raises stranded‑asset risk across commercial real estate
• Lenders penalise inefficient buildings, tightening financing terms

Pulse Analysis

The recent slowdown in MEES compliance reflects broader financial headwinds that began in 2025. While the early‑2020s saw a 26% annual rise in high‑grade Energy Performance Certificates (EPCs), the pace fell to 20% last year and the absolute number of A, A+ and B ratings dropped 22% from the 2023 high. Analysts attribute this to tighter credit conditions, higher borrowing costs, and uncertainty around new tax policies, which together dampen investors' appetite for costly retrofits.

Offices are the most vulnerable segment, now responsible for nearly half of all F and G‑rated properties. Over the past five years more than 3,500 office buildings fell into the illegal bands, and in 2025 alone 1,246 non‑domestic assets were classified as F or G. At retrofit costs of £100‑£200 per square foot—approximately $130‑$260—owners face steep capital outlays that often exceed the projected return on energy savings, especially as oil and wholesale‑gas prices surge. Lenders are responding by imposing higher interest rates and stricter covenants on inefficient assets, further squeezing cash‑flow.

The convergence of sluggish compliance, escalating upgrade expenses, and volatile energy markets raises the specter of stranded assets across the commercial real‑estate portfolio. Properties that cannot meet the B‑rating target by 2030 risk vacancy, devaluation, and complex lease renegotiations. Policymakers may need to consider incentive schemes or phased compliance timelines to avoid a systemic shock, while investors should reassess exposure to low‑efficiency buildings and prioritize capital for green retrofits to safeguard long‑term asset performance.